Ethereum now safer for institutional investors?

Dear member,

The much anticipated Ethereum Shanghai-Capella upgrade went off without a hitch. Since the activation of Shanghai, over 98,000 withdrawals have been processed, and over 203,000 ETH distributed to validators. No “sell the news” type of drop happened to Ethereum, further solidifying a growing narrative among institutional investors that Ethereum’s volatility has significantly reduced, making holding ETH less risky for the long term.

Despite the recent regulatory actions in the U.S., digital asset adoption and acceptance have grown stronger throughout this bearish period. Macro investor Dan Tapiero notes that more institutional players have entered the crypto industry, unlike the previous bear cycle. The combination of digital currency growth and geopolitical shifts, especially among the BRICS nations, may signal a weakening U.S. dollar role in the global economy, as predicted by economist Jeffrey Sachs.

This begs the question - will renminbi, rupee and ruble come to dominate the global economy in this coming decade, or will CBDCs take over long-established fiat currencies and even major cryptocurrencies like Bitcoin and Ethereum? G7 nations have expressed plans to help developing countries introduce their own CBDCs, while G20 is aiming to craft a framework by year-end to help countries deal with risks associated with cryptocurrency investments. More regulation by guidance is needed, rather than the U.S. policymakers’ approach of regulation by enforcement. The former helps the industry to grow, while the latter only repels good actors from participating in Web3.

Some of the world's most well-known brands, such as Nike, Starbucks, Porsche, Gucci, and Prada, have joined the Web3 ecosystem by registering their domain names with Unstoppable Domains and Ethereum Name Service. These two providers are currently considered the leading blockchain domain name services for Web3 participants. Other big names making a Web3 play include Twitter partnering with eToro and Bruce Lee’s estate launching an NFT collection, with over 16,500 pieces minted to date.

On the topic of names, an AI-powered start-up CryptoGPT - no relation to ChatGPT - raised $10m in funding against a $250m valuation. A lot of skepticism arose from their deal with DWF Labs. Is the start-up leveraging on OpenAI’s flagship name and trending AI narrative just for the sake of it? Why is their team’s background opaque? Should more scrutiny be poured on DWF Labs, which is both a venture capital firm and a market maker? It may be too soon to tell, but some deals - like this one - are worth a second look.

Since Bitcoin breached $30,000 for the first time since June 2022, the Crypto Fear and Greed Index steadily remains in "Greed" territory. Pessimism has flipped to optimism as both institutional money flow in and industry players make big moves. A $100 million fund for Web3 cryptocurrency projects in Asia has been launched by Bitget, the cryptocurrency exchange. The fund will prioritize projects with experienced teams and well-defined roadmaps that aim to solve real-world issues.

While more innovators and organizations keep building in Web3, so will rules grow. Regulators in the U.S. and the U.K. are adding more headcount to their digital asset teams, and banks in Europe, like Sweden's central bank, Riksbank, and Central Bank of Montenegro, are working with the private sector to build CBDCs. Hong Kong's virtual bank ZA and Swiss state-backed bank PostFinance have recently stepped up and begun offering crypto-related services to their clients.

More regulatory-compliant pathways in and out of crypto are being built, though the same can’t be said of the U.S. It’s clear that policymakers in Europe and Asia have embraced digital assets as not a threat but a growth opportunity. But how will CBDCs fare in the future global economy, and how will they affect major cryptocurrencies like Bitcoin and Ethereum, or vice versa?

Best regards from the Future,
RFTF.ai 

Market Intel

Ethereum's Shapella upgrade may attract institutional investors. Despite the hard fork risks, the upgrade should reduce volatility and make holding ETH long-term less risky.

Macro investor Dan Tapiero notes that institutional interest in the crypto industry has picked up throughout the bear market - a marked difference from the previous cycle - with larger players noticing fundamental strength in the asset class.

Economist Jeffrey Sachs predicts U.S. dollar to play a smaller role in the global economy over the next decade while renminbi, rupee and ruble to increase in importance. Sachs cited several reasons, one of which is the introduction of digital currencies.

Bitcoin reaches high of $30k for the first time since June 2022, gaining almost 46% in the last 30 days. The Crypto Fear and Greed Index remains in "Greed" territory, with a score of 68 out of a possible 100.

Ethereum surged past $2.1k, up over 11% since the Ethereum Shanghai-Capella upgrade. The upgrade saw the completion of Ethereum network’s transition from a PoW to PoS protocol, enabling stakers to unstake their ETH for the first time.

Funding Trends

Cryptocurrency exchange Bitget launches $100m fund for Web3 crypto projects in Asia, focusing on experienced teams with clear roadmaps tackling real-world problems.

Hong Kong-based wealth manager Metalpha raised $100m to offer Grayscale Bitcoin products in Hong Kong, allowing institutions and high-net-worth individuals to get indirect exposure to crypto.

EOS Network receives $60m investment and partnership from DWF Labs, the venture capital firm's largest one to date.

Sei Labs raised $30m in two funding rounds at a $800m valuation. Investors included Jump Crypto, Distributed Global, Multicoin Capital, Asymmetric Capital Partners, Flow Traders, Hypersphere Ventures and Bixin Ventures.

AI-focused Web3 startup CryptoGPT raised $10m funding at $250m valuation, capitalizing on the rising AI trend and zero-knowledge (ZK) Layer-2 blockchain protocols.

Web2 → Web3 Immersion

Twitter partnered with eToro to allow users to invest in Bitcoin via the platform, following Twitter adding pricing data for $Cashtags in December 2022.

National Bank of Canada acquired 8.8% more shares in MicroStrategy during Q1 2023 and joins a list of traditional firms, including Fidelity, BlackRock, and Bank of America, acquiring Bitcoin exposure through MicroStrategy shares.

Global brands like Nike, Starbucks, Porsche, Gucci, Prada, and more have entered Web3, with many of them registering their domain names with Unstoppable Domains and Ethereum Name Service - the top blockchain domain name providers for Web3 users, with over 3.3 million and 2 million names registered, respectively.

Decentralized lending protocol Maple Finance plans to launch a new liquidity pool that will allow accredited investors and corporate treasuries outside the US to invest stablecoin holdings in U.S. Treasury bonds and earn a yield. The pool is part of the trend of real-world assets picking up in the decentralized lending sector.

Late martial artist and actor Bruce Lee entered Web3 through a partnership between the Bruce Lee Foundation and NFT-driven video platform Shibuya - recently raising $6.9m in funding. Shibuya co-founder Emily “pplpleasr” Yang created an open edition NFT, “House of Lee: Genesis,” with over 16,500 NFTs minted so far.

LimeWire, a once popular file-sharing platform turned NFT marketplace, will reward crypto to its top 1,000 players who download pirated music. They will also receive LimeWire’s upcoming token, LWMR.

Virgin Money partnered with leading financial services facilitator FNZ and launched a digital wealth platform with leverage, offering three investment options, all focusing on companies with good ESG credentials.

Regulatory Round-up

APAC

Hong Kong's virtual bank ZA set to provide crypto account services and facilitate crypto-to-fiat exchanges in Hong Kong dollars, Chinese yuan, and U.S. dollars, offering a potential solution to crypto firms struggling to find banking partners in the U.S.

EU

Swiss state-backed bank PostFinance will partner with Sygnum Bank to offer crypto-related services to its customers, enabling them to buy, store, and sell leading cryptocurrencies such as Bitcoin and Ethereum. Sygnum is already working with more than 15 partner banks in Switzerland to help them enter the crypto industry in cost-efficient ways with regulation-compliant products.

The Bank of England is looking to hire up to 30 people to develop a central bank digital currency (CBDC), with various vacancies being advertised. In February, the bank and the UK's finance ministry announced that they would begin further research and development on a digital pound.

London Stock Exchange Group's LCH division signed a deal with UK-based trading venue GFO-X to offer bitcoin derivatives trading. The new venture, LCH DigitalAssetClear, plans to clear bitcoin index futures and options based on the GFO-X/Coin Metrics Bitcoin Reference Rate, which tracks the US dollar price of bitcoin.

Ripple signed a deal with the Central Bank of Montenegro to create a national digital currency or stablecoin for an unspecified country that currently uses the euro. The CBDC project, which will be implemented under controlled conditions, is expected to start this month.

Sweden's central bank, Riksbank, proposed a collaborative model for e-Krona retail payments and conditional payments, with transparency, privacy, and governance evaluated. Riksbank is working with other major economies, such as the US and Europe, on the CBDC project.

International

G7 nations aim to help developing countries introduce their own CBDCs while ensuring transparency and sound governance. The FSB and the IMF will present a jointly produced synthesis paper for global crypto rules by September or October.

G20 envisions a common framework to help countries deal with risks associated with cryptocurrency investments. India's finance minister called for coordinated global crypto policies, highlighting the need for a coordinated effort from all jurisdictions following numerous crypto collapses.

LATAM

Argentina's securities regulator, the National Commission of Value (CNV), approved the regulation of Bitcoin index futures contracts on the Matba Rofex exchange. The futures contracts will be traded and settled in Argentine pesos, allowing investors to gain exposure to Bitcoin's price without owning the underlying asset.

US

Texas lawmakers have proposed a state digital currency that is backed by gold rather than the dollar, with each unit representing a fraction of a troy ounce of gold held in trust and 100% of the currency reserves backed by the precious metal.

The Texas Senate passed a bill aimed at removing tax incentives and electricity credits for crypto miners and limiting their participation in demand response programs to 10%.

Arkansas has passed a bill to clarify the regulation of cryptocurrency mining and protect the industry from discriminatory overregulation and taxes. The Arkansas Data Center Act of 2023 aims to create guidelines for crypto mining companies to operate in Arkansas as long as they comply with state laws.

The US Securities and Exchange Commission (SEC) is looking to hire general attorneys for its Crypto Assets and Cyber Unit to conduct complex and fast-moving investigations regarding crypto-asset securities and cyber issues, according to a job posting. This comes after Chair Gary Gensler requested nearly $2.4 billion in funding for chasing crypto misconduct.

The Raven Also Spotted

Robert Kennedy, a US presidential candidate, advocates using Bitcoin as an alternative to the traditional financial system and argues that Bitcoin and other cryptocurrencies offer an escape route for the public when the current "financial bubble" inevitably bursts.

Bitcoin briefly surpassed Tesla as the 10th largest asset by market capitalization, spending several hours above the automaker, and still ranks higher than Facebook's Meta.

MicroStrategy's Bitcoin investment is now profitable as BTC breaks $30,000. The company has accumulated 140,000 BTC for nearly $4.17 billion at an average price of $29,803 per BTC.

Bankrupt cryptocurrency exchange FTX has recovered $7.3 billion, the majority of its assets owed to customers. FTX may be set for a revival next year, as its lawyer has said the legal team will plan to discuss next steps for a potential restart or recapitalization of the exchange.