Has the TradFi wave finally arrived in Web3?

Dear member,

The past week saw more TradFi giants like Valkyrie, Ivesco and WisdomTree filing for spot Bitcoin ETF applications. EDX crypto exchange, backed by Fidelity Digital Assets, Charles Schwab, and Citadel Securities, launched with an offering of four tokens in the U.S. amidst mixed reactions from the Web3 community.

This sudden influx of institutional players seems to have revived the crypto market, with Bitcoin closing above $30,000 on the daily for the first time in three months after a prolonged bearish period. While the timing is suspicious (during an ongoing SEC lawsuit against Binance and Coinbase), the entry of large established TradFi players is proof that Web3 has more room to grow.

Institutional investors across the board are indicating a more favorable view of crypto, with 96% of respondents from a recent survey considering them as a portfolio diversification opportunity. Despite the positive sentiment, the market has seen outflows for nine consecutive weeks, with Ethereum-based funds leading the way. Interestingly, Bitcoin mining difficulty is inching towards an all-time high, often a sign of an impending bullish phase.

Venture capital is also making waves in the crypto sector, especially in infrastructure and Web3:

Global brand giants such as LVMH, Sotheby’s, Puma, and award-winning artists like The Weeknd have been making strides into the space through a multitude of collaborations and phygital NFT ventures. This is yet another clear sign of convergence between legacy institutions and the emerging blockchain world.

Echoing the deepening encroachment of TradFi and Web2 global brands into crypto, China continues to solidify its position by aiming to register and onboard a record number of blockchain companies. Meanwhile, in the US, the tokenization debate rages on, and more U.S. congressmen vocalize dissension with the SEC’s stance on crypto regulation, or rather the lack of.

It has been quite a week for Web3, from BlackRock’s eye-raising ETF trust filing - amidst SEC’s ongoing lawsuits against Binance and Coinbase no less - to an uptick in positive sentiment and multiple global brands staking a hold on web3 to ZachXBT’s crowdfunded raise from the crypto community.

To sum it up, Barclay’s former CEO said it best when he echoed the optimism-fuelled BlackRock’s attempt to enter crypto. This might be the worst of times economically speaking, but this may also be the beginning of the best of times for Web3.

Best regards from the Future,
RFTF.ai

Market Intel

96% of surveyed investors working for pension funds, wealth managers, family offices, hedge funds and investment funds see digital assets as an investment diversification opportunity. The global study by Nomura indicated the majority are positive about digital assets, particularly Bitcoin and Ethereum. This indicates institutions have a deep understanding in crypto.

Digital assets see $423m outflows, its 9th week in a row despite positive news about BlackRock ETF application. Rate of outflow slowed to $5.1m, down from $88m the previous week. Ethereum-based funds accounted for the majority of outflows at $5m against Bitcoin’s $500,000. Altcoin-based funds saw inflows of $2.4m, with focus on Ripple, Cardano, and Polygon.

Bitcoin mining difficulty may reach new all-time high soon. The current difficulty is at a record high of 52.35 trillion hashes and is expected to increase to 53.33 trillion hashes later this month, signaling a potentially bullish sign for BTC’s price action. As more miners compete to solve blocks and earn BTC, fewer BTC is introduced into circulation. Increased mining difficulty and reduced supply often sparks buying interest in the market.

Long-term Bitcoin holders have remained largely inactive despite recent price volatility. Coin Days Destroyed (CDD), a metric that tracks movement of mature coins, is usually elevated during primary bull markets. These long-term holders are not participating in buying and selling activity, with this trend persisting despite the market rally and recent volatility due to factors such as SEC charges against Binance and Coinbase.

Bitcoin surged above $29,000 for the first time in over a month. This rally follows an increase in bullish sentiment in the crypto market, likely due to news of TradFi players venturing into crypto - including BlackRock and Deutsche Bank, and launch of crypto exchange EDX Markets (backed by Charles Schwab, Citadel Securities, and Fidelity Digital Assets).

Crypto venture capital investments rose for the 2nd consecutive month in May, despite declining economic backdrop. Funding amounts surged 34% from April, and the number of individual deals jumped 62%. The crypto VC market saw $1.1b in investments in May, the 1st month to surpass the $1b mark since Sep 2022. The infrastructure sector led the market in capital inflows with $783.9m in 23 rounds, over 68% of the total invested money. However, the number of deals was highest in the Web3 sector with 24 deals, but only $170.1 million in funding.

Bitcoin shows a positive correlation with gold and a negative correlation with tech stocks. BTC has gained roughly 58%, the Nasdaq about 36%, and gold just over 7% YTD. The correlation between Bitcoin (BTC), gold, and tech stocks has been a topic of interest, with narratives shifting based on market trends. However, correlations can be transient and do not necessarily indicate a long-term market relationship.

Open interest in Bitcoin has surged to a 4-month high, with approximately 418,000 Bitcoin held in open interest contracts, indicating increased investor engagement. The Chicago Mercantile Exchange (CME), a key driver of this growth, currently holds 83,560 Bitcoin in futures open interest contracts, the highest level since January. This suggests a significant return of institutional investor interest in Bitcoin futures.

NFT sales rose by 11.60% compared to the previous week, reaching a total of $146 million. Total buyers purchasing NFTs in the past 7 days has also surged by 95.20%, reaching a total of 664,096 buyers. Ethereum (ETH) continues to dominate the NFT market, with $85.43 million in sales.

Funding Trends

NFT data firm Mnemonic raised $6m in a seed extension round led by Salesforce Ventures, with participation from Polygon Ventures, Orange DAO, FIN Capital, and FJ Labs. The funding will be used to accelerate Mnemonic's product roadmap and expand its suite of APIs. This follows Mnemonic's announcement of support for Polygon and Optimism, as well as Coinbase's Base testnet.

Concordia raised $4m in a seed funding round co-led by Tribe Capital and Kraken Ventures. The multi-chain risk and collateral management protocol for digital assets aims to streamline the process of transferring assets or accessing liquidity between blockchains, making it easier for users to manage cross-chain liquidity and collateral.

Galaxy Finance secured $30m in a Series B funding round led by BlackPine, QCP Capital, and Tally Capital. The funding will be used to expand the leading Web3 wallet platform’s offerings and presence in the Southeast Asian market, and to improve its financial education initiatives.

Kaito raised $5.5m in a Series A funding round at a $87.5 million valuation. The crypto search engine combines large language models with real-time access to data from the web and on-chain data.

Anichess raised $1.5m from investors to further develop the title. The chess-inspired crypto game, developed by Animoca Brands, adds a magical twist to traditional chess rules and is expected to launch a playable alpha test in Q1 2024.

Neutron secured $10m in a seed funding round co-led by Binance Labs and CoinFund. The funding will be used to support the expansion of the Neutron smart contract platform and to develop the Atom Economic Zone, a safe ecosystem for users transacting across different blockchains.

Web2 → Web3 Immersion

LVMH partnered with Epic games to create immersive customer experiences and add new 4D technologies to its design pipeline. It's also targeting high net worth collectors through its phygital VIA Trunks NFTs, which launched on 9 June and sold out within the same day. The luxury conglomerate behind brands like Louis Vuitton and Dior is making significant strides into the web3 space through partnerships, community projects, and investments.

Grammy winning artist The Weeknd partnered with Binance to enter the Metaverse involving the creation of a virtual concert experience and release of exclusive NFTs. The collaboration aims to provide fans with a unique, immersive experience and expand the use of NFTs in the music industry.

Sotheby's NFT auction featuring Snoop Dogg's collection has raised $11 million. The auction included unique pieces from Snoop Dogg's personal collection and showcased the growing interest and investment in NFTs in the art world.

Nike and Fortnite are collaborating on a new NFT apparel collection. The collaboration will allow Fortnite players to wear digital versions of popular Nike apparel within the game. The partnership represents a significant step in the integration of fashion and gaming in the Metaverse.

Japanese conglomerate Mitsui is investing in Web3 through Animoca Brands, to aid Animoca Brands in developing new blockchain games and expanding its NFT business. The partnership represents a significant endorsement of Web3 and the potential of blockchain technology in the gaming industry.

Binance will release a Cristiano Ronaldo NFT collection of unique digital assets related to the superstar footballer, providing fans with a new way to connect with their favorite player.

Crypto-friendly bank Xapo expands to India and the rest of South Asia, offering services such as a USD offshore savings account and a Bitcoin wallet. The expansion is in line with the rapidly growing interest in cryptocurrencies in Asia.

Mastercard broadened its Engage program to expedite the launch of crypto card programs by leveraging its global network. The initiative reduces launch time, enables crypto-to-fiat conversions, and ties in with TradFi firms' foray into digital assets. Plus, it complements Mastercard's crypto credentials program aimed at AML checks for international transactions.

HSBC and Mastercard filed additional trademark applications related to cryptocurrencies. These applications indicate an increased interest in offering crypto-related services, aligning with the growing trend of TradFi institutions exploring the digital asset space.

Puma, Gutter Cat Gang, and NBA player LaMelo Ball releases a phygital NFT sneaker collection - the “GutterMelo MB.03” digital sneaker collection. The collaboration looks to bring more mainstream awareness to web3 technology and digital collectibles.

Amazon is participating in a pilot program for a new CBDC proposed by the Monetary Authority of Singapore (MAS), the International Monetary Fund (IMF), Banca d’Italia, and the Bank of Korea. The program is paired with a whitepaper that proposes conditions for the use of CBDCs, tokenized bank deposits, and stablecoins. The initiative aims to facilitate more efficient transactions, enhance financial inclusion, and unlock economic value.

Regulatory Round-up

APAC

China plans to register 30,000 blockchain companies, signaling its ambition to become a leading force in the blockchain industry. The move is seen as part of the government’s broader strategy to leverage blockchain technology for various sectors, including finance, supply chain, and public services.

Singapore's Monetary Authority specified new protocols for transferring digital programmable money. The central bank released a whitepaper describing the life cycle of so-called purpose-bound money and how it could be programmed to settle transactions between businesses and vendors.

Australian banks are initiating restrictions on cryptocurrency transactions due to concerns about financial crime, sparking debate about the implications for the crypto industry in Australia, with some fearing it could stifle innovation.

EU

The UK enters final stages of implementing new crypto laws, which aim to provide a clear regulatory framework for the crypto industry. The laws will cover areas such as consumer protection, market integrity, and financial crime.

18 Italian banks partnered for a project known as Project Leonidas, aiming to explore blockchain applications that promote financial stability and protect consumers.

International

IMF is developing a platform for CBDCs that could enhance transparency and make cross-border settlements cheaper and easier. However, central banks would have to agree to a common regulatory framework.

Russia set to trial digital asset settlements in foreign trade, aiming to reduce reliance on the SWIFT system and the US dollar. The pilot project will involve 5 major Russian companies and two banks. By 2024, Russia aims to legalize crypto mining with plans to establish specialized authorized mining organizations. The move aims to bring the industry out of the shadows and into the formal economy.

US

US banking watchdog advocating for tokenization but not on public blockchains. The Acting Comptroller of the Currency, Michael Hsu, argues that public blockchains lack the necessary privacy and security for financial transactions.

Congressman Patrick McHenry is working to reform crypto regulation in the US. As chair of the House Financial Services Committee, he's focusing on digital asset market structures and stablecoins. Despite challenges, his commitment sends a powerful message about the future of digital assets in the US.

Binance has reached an agreement with the SEC after the regulator attempted to freeze the American arm of the firm's assets. The agreement allows Binance.US to maintain sole possession of its customers' assets, resolving the disagreement on mutually acceptable terms.

The Raven Also Spotted

Crypto community donated nearly $600,000 in digital assets within 14 hours to help fund prominent crypto researcher ZachXBT’s defamation lawsuit over an article published last year, alleging that 22,000 ETH was embezzled from Formosa Financial in 2018 and launched several failed pump and dump tokens and NFT projects. ZachXBT has called the lawsuit baseless and an attempt to suppress free speech.

Tether found to have funds in commercial paper and other securities including several Chinese banks and financial institutions. The issuer of the world’s largest stablecoin also had funds in 4 banks, 2 investment management firms, 2 gold depositories, a gold broker, and its sister company Bitfinex in March 2021. The documents provide a snapshot of Tether's operations and its tenuous reliance on commercial paper.

AI and blockchain mutually benefit each other, particularly in gaming, asserts Robby Yung, CEO of Animoca Brands. AI boosts productivity in game development and makes NPCs in blockchain games more interactive with crypto transactions. He anticipates crypto becoming AI’s native currency, but recognizes cost and power as shared limitations of AI and blockchain.

Bitcoin will be the best trade of the decade, claims Cameron Winklevoss, Co-Founder and President of crypto exchange Gemini. He suggests that the "great accumulation of Bitcoin" has begun and that the asset will experience a significant uptrend once a Bitcoin Spot ETF is approved in the United States. His comments come in the wake of BlackRock's efforts to launch a spot Bitcoin ETF, which has sparked optimism in the crypto space.

Ex-Barclays CEO Bob Diamond expressed enthusiasm for BlackRock's recent activities in the crypto space during a CNBC interview. He stated that he "loves seeing some of the mainstream firms get involved here, like BlackRock," indicating his support for TradFi institutions' foray into the world of digital assets.