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A Political Ploy or A Strategic Reserve Asset

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• Bitcoin: A Political Ploy or a Strategic Reserve Asset? • Surviving Bitcoin’s Headwinds Amid Improving Macroeconomics

• Bitcoin: A Political Ploy or a Strategic Reserve Asset?

• Surviving Bitcoin’s Headwinds Amid Improving Macroeconomics

• The Approval of Ethereum ETFs and its Impact

• The Spotlight on DeFi: A Transformative Era

Surviving Bitcoin’s Headwinds Amid Improving Macroeconomics

The macroeconomic results that came out in July indicate improvements, still not enough to cut rates in the U.S., but there may be more than meets the eye. Increasing at an annual rate of 2.8% in the second quarter, the Gross Domestic Product (GDP) significantly exceeded expectations. With interest rates reaching the highest since the dot-com bubble, net interest payment is projected to reach the highest level as a percentage of GDP in over two decades. While the Fed’s collective sentiment over rate cuts is still uncertain, easing pressure on debt repayment could become increasingly important during the election season.

On the other hand, Wall Street had the worst month since October 2022. Disappointing second-quarter earnings from tech companies wiped out ~$985B off Nasdaq’s market cap on July 24. The stock market picked up on July 26 after a positive indicator boosted optimism about inflation. In line with expectations, the Federal Reserve’s favorite gauge of inflation, Personal Consumption Expenditures (PCE), rose by 2.5% from a year ago, 0.1% from last month. The PCE reading sparked optimism that the Fed might start cutting rates in September as the market predicted, which would bode well for Bitcoin and the longer tail of cryptoassets since lower borrowing costs will encourage bigger risk-on appetite. Some are even hoping Fed officials would hint at the prospect in the upcoming meeting on July 31.

Figure 1 – Bitcoin’s Price Movement Against Headwinds

Source: 21Shares

Enjoying some political attention, Bitcoin held strong amid the tech dip, but it still had other headwinds to worry about.

• Between June 19 and July 12, the German government sold $2.88B worth of Bitcoin, seized from movie piracy website, Movie2k, earlier this year. Bitcoin fell by 10.7% over that period.

• In preparation for the repayment plan that began in July, Mt. Gox transferred $2.8B on July 16 from its cold wallet to a deposit address tied to Bitstamp, one of the five exchanges that have 60 days to distribute the tokens to Mt. Gox’s creditors. Bitcoin fell by just 1.6% on that day. Mt. Gox currently has $5.35B left in its holdings and originally $9B in total to return to creditors.

• On July 29, the U.S. government transferred $2B worth of confiscated Bitcoin to an unidentified wallet, pulling the price from $69.9K to as low as $66.6K in a few hours.

Finally, after months of negotiation, the Commodity Futures Trading Commission (CFTC) and FTX agreed that the latter would pay up to $12.7B to its creditors, pending judge approval. However, creditors have opposed this plan, arguing that FTX should pay them in-kind rather than dollar terms. A hearing on the settlement motion is scheduled for August 6, and a vote on the plan is due on August 16. Bitcoin and Solana are at the forefront of the potential market impact, with FTX previously announcing they have around 50 million SOL tokens and over 20K BTC. However, there are some silver linings. First, the crypto industry will finally turn the page on a dark chapter of its history. Last but not least, Bitcoin is a strategic subject matter used by some of the most powerful leaders in the world; excitement around it could balance out the repercussions of FTX’s repayment plan in the coming months.

In conclusion, slow macroeconomic improvements coupled with the urgency of the looming debt crisis in the U.S. are painting a picture of easing market conditions through the summer. Nevertheless, the crypto industry must weather the headwinds mentioned above, which investors should consider.

Bitcoin: A Political Ploy or a Strategic Reserve Asset?

On July 26, a range of Democrats sent a letter to the Democratic National Committee, urging them to pivot their adversary stance against crypto, citing that “crypto is at the top of voters’ minds in swing states.” They were probably spooked by Donald Trump’s progression towards crypto since the start of his presidential campaign. Arguably the most anticipated event this quarter was the Bitcoin conference in Nashville, with this year’s iteration seasoned by the presidential elections. The main (if not the only) reason for the excitement, marked by the crypto derivatives market as explained in our previous newsletter, was Trump’s speech on July 27.

If elected as president on November 5, Trump cautiously revealed he’ll do as follows:
• Establish a crypto presidential advisory council and create a national “stockpile” of Bitcoin.

• Keep 100% of the government’s confiscated Bitcoin holdings intact.

• Adopt stablecoins, viewed as pro-dollar, and establish a regulatory framework.

Similarly, Republican Senator Cynthia Lummis has been working on legislation requiring the Federal Reserve to hold Bitcoin as a strategic reserve asset, alongside gold and other foreign currencies, to manage the government’s monetary system. She proposes that the U.S. buys 1M BTC over the course of five years and hold it for 20 years to reduce national debt, which has soared to record highs, as shown in Figure 2. The idea also excited lawmakers elsewhere. On July 28, Johnny Ng, a Hong Kong Legislative Council member, announced that he’d be lobbying for and exploring the feasibility of including Bitcoin in financial reserves with different stakeholders in Hong Kong.

Figure 2 – U.S. National Debt Soars to $35 Trillion

Source: U.S. Treasury

It is important to remember that politically induced vows (especially during elections) are more often than not just talk. Many have deemed the prospect of Bitcoin as a reserve asset in the Treasury’s balance sheets as politically unrealistic, although feasible and fitting Bitcoin’s fundamentals. Surely, the paradigm shift in sentiment from “scam” to strategic reserve asset has enticed institutions to accumulate more Bitcoin in July:

• Boasting $150M in total net assets, Cantor Fitzgerald’s CEO confirmed the company holds undisclosed amounts of Bitcoin and is launching a $2B BTC financing business, which they’ll increase by $2B increments.

• On July 26, the State of Michigan Retirement System added $6.6M in Bitcoin ETFs to its pension fund assets, which now total $143.9M.

• On July 25, the Jersey City mayor announced they’re updating paperwork to allocate a percentage of the fund to Bitcoin ETFs. In May, the Wisconsin Pension Fund allocated 2%.

In summary, even if the announcements made at the Bitcoin conference do not come to fruition, the fact that crypto’s use case is emerging in aiding a major economy like the U.S. is a significant boost for adoption. However, retail interest is still estimated to be only 25% of what it was in May 2021. As the discussion continues and more politicians get involved from both sides of the aisle, the market is poised to witness unprecedented levels of mainstream adoption.

The Approval of Ethereum ETFs and their Impact

The first week of trading for Ethereum ETFs has largely met the expectations outlined in our last newsletter. The nine ETFs have generated $4.5B in total volume, approximately 15-20% of Bitcoin ETFs’ first-week volume. However, Ethereum ETFs experienced a net outflow of ~$300M, compared to Bitcoin ETFs’ $1.5B inflow during their debut week, as seen below in Figure 3.

Figure 3: Comparing BTC & ETH US Spot Net Flows

Source: Steno Research

Nevertheless, we expect that ETH will demonstrate heightened price sensitivity in the coming months. This is largely because 45% of ETH’s total supply is either locked away in staking or smart contracts or is lost. Further, ETH’s liquid supply on exchanges is lower than that of Bitcoin, with only 10% of ETH available compared to 12% for Bitcoin. Unlike Bitcoin, Ethereum does not experience significant selling pressure from miners, who typically sell an average of $5M-10M of their holdings daily to cover operational costs. Consequently, ETH is likely to react more sharply to market demand due to its limited liquidity and the lack of consistent miner offloading.

As a reminder, Ethereum and Bitcoin ETFs are complementary rather than competitive products in a portfolio, each representing distinct market segments. Bitcoin is primarily viewed as digital gold due to its scarcity and immutable monetary policy, positioning it as a potential hedge against economic instability. Further, while Bitcoin is also growing into a software-as-a-service platform, this transition is yet to fully materialize. In contrast, Ethereum serves multiple purposes, functioning as a global app store, a financial settlement layer, and a tokenization hub. While Bitcoin addresses financial system concerns, Ethereum aims to enhance the internet infrastructure and underpin the digital economy.

This differentiation suggests that both ETFs can coexist, catering to diverse investor needs and market demands. With this in mind, the approval of ETH lends legitimacy to the foundational infrastructure supporting the Web 3 ecosystem. Thus, we anticipate this recognition will cascade to a broader range of assets, with decentralized finance (DeFi) protocols likely emerging as prime beneficiaries of this increased attention.

The Spotlight on DeFi: A Transformative Era

DeFi has been having its shining moment, which is evident in the record-breaking performance of decentralized exchanges (DEXs). For the first time, DEX spot trading volume reached 14% of centralized exchange volume, marking an all-time high in the ratio between the two types of platforms. This growth is symbolic of migration towards non-custodial infrastructure that’s been in motion for the last two years, driven by users’ growing trust in crypto’s railways.

With the approval of Ethereum ETFs, we foresee a growing emphasis on consumer-facing applications within the industry. We also predict that fundamental valuation will become more significant as the industry gains credibility, favoring businesses with strong fundamentals. In this context, four of the top 15 revenue-generating Web 3 protocols are well-established DeFi platforms like Aave, MakerDAO, Lido, and Uniswap, as observed below in Figure 4. This highlights the market suitability of well-designed DeFi protocols, even as the industry evolves and attracts new participants. With this context, let’s discuss the forthcoming protocol upgrades that we believe will elevate their prominence amidst the changing landscape.

Figure 4: Revenue Performance Ranking of the Top 20 Protocols over the Last Year

Source: TokenTerminal

First is Aave. The leading decentralized lending protocol by Total Value Locked and the sixth-largest revenue-generating DeFi application is gauging community sentiment on implementing a fee switch. This proposal, spearheaded by Aave’s founder, aims to distribute the protocol’s excess revenue to token holders. Additionally, it suggests using part of the excess revenue to buy back AAVE on the secondary market, thereby ensuring consistent demand for the token. This new tokenomics model would allow stakers to earn AAVE sustainably, avoiding the drawbacks of an inflationary issuance mechanism.

That said, Aave’s temperature check should conclude by next week, followed by a snapshot vote. Thus, it’ll likely take a few weeks to fully implement the mechanism if the community approves the proposal. Worth mentioning that Aave’s proposal takes a cue from a previous initiative by Uniswap, which sought to allocate trading fees to token stakers but postponed the governance vote in June. That said, we believe the recent regulatory clarity regarding Ethereum could reignite the momentum needed for more DeFi applications to incorporate security-like features into their frameworks. Thus, this could transform their respective tokens into capital-generating assets, rendering them attractive.

On a different note, MakerDAO referred to as Ethereum’s global reserve bank and the issuer of DAI, is fully embracing the tokenization trend. The protocol already generates more than half of its revenue from tokenized products, which include private credit and US treasury yields, as shown in Figure 5. This positions MakerDAO at the forefront of crypto protocols integrating with traditional finance. Now, MakerDAO plans to invest an additional billion dollars into tokenized treasuries. This move has prompted sector leaders like Blackrock’s Securitize BUIDL fund, Ondo Finance, and Superstate to apply for the Grand Prix competition, which begins in the second week of August. Once implemented, this initiative is expected to boost the total government securities AUM by 55%, expanding the market size to $3B. This would represent a 30-fold increase since April 2023.

Figure 5: MakerDAO’s Revenue by Type

Source: SteakHouse on Dune

This development solidifies MakerDAO’s position as a pivotal player in the tokenization landscape, while providing a robust proxy investment into crypto’s application layer. Its strength is underscored by the fact that Maker accounts for nearly 40% of Ethereum’s total DeFi profits, making it the third-largest revenue-generating protocol in the industry, as echoed above in Figure 4.

To recap, we believe the approval of Ethereum ETFs is poised to legitimize the market, boost investor confidence, and accelerate the adoption of Ethereum-based applications. As a result, established protocols with proven track records of resilience and revenue generation will likely attract significant investor attention in the coming months.

Next Month’s Calendar

Source: Forex Factory, 21Shares

Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

Disclaimer

The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.

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FTGD ETF spårar amerikanska small och mid caps som ökar utdelningen

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First Trust SMID Rising Dividend Achievers UCITS ETF Class A Accumulation (FTGD ETF) med ISIN IE0001R850E1, syftar till att spåra Nasdaq US Small Mid Cap Rising Dividend Achievers-index. Nasdaq US Small Mid Cap Rising Dividend Achievers-index spårar amerikanska små och medelstora företag som konsekvent har ökat sina utdelningar de senaste åren.

First Trust SMID Rising Dividend Achievers UCITS ETF Class A Accumulation (FTGD ETF) med ISIN IE0001R850E1, syftar till att spåra Nasdaq US Small Mid Cap Rising Dividend Achievers-index. Nasdaq US Small Mid Cap Rising Dividend Achievers-index spårar amerikanska små och medelstora företag som konsekvent har ökat sina utdelningar de senaste åren.

Den börshandlade fondens TER (total cost ratio) uppgår till 0,60 % p.a. First Trust SMID Rising Dividend Achievers UCITS ETF Class A Accumulation är den enda ETF som följer Nasdaq US Small Mid Cap Rising Dividend Achievers-index. ETFen replikerar det underliggande indexets prestanda genom fullständig replikering (köper alla indexbeståndsdelar). Utdelningarna i denna ETF ackumuleras och återinvesteras.

ETF lanserades den 9 april 2024 och har sin hemvist i Irland.

Handla FTGD ETF

First Trust SMID Rising Dividend Achievers UCITS ETF Class A Accumulation (FTGD ETF) är en europeisk börshandlad fond. Denna fond handlas på flera olika börser, till exempel Deutsche Boerse Xetra och London Stock Exchange.

Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRONordnet, Aktieinvest och Avanza.

Börsnoteringar

BörsValutaKortnamn
XETRAEURFTGD
London Stock ExchangeGBXSMID
London Stock ExchangeUSDSDVY

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Ny krypto-ETN från Valour på Xetra ger tillgång till Bitcoin i kombination med insatspremie

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Sedan i fredags har en ny krypto-ETN från Valour kunnat handlas på Xetra och Börse Frankfurt. Med 1Valour Bitcoin Physical Staking ETP (1VBW) får investerare tillgång till prestanda för kryptovalutan Bitcoin och kan även dra nytta av insatsbelöningar. Staking är processen att låsa kryptotillgångar på blockkedjan för att validera transaktioner. I gengäld genereras en belöning, i det här fallet i form av CORE-tokens, separat och omvandlas till Bitcoin dagligen.

Sedan i fredags har en ny krypto-ETN från Valour kunnat handlas på Xetra och Börse Frankfurt. Med 1Valour Bitcoin Physical Staking ETP (1VBW) får investerare tillgång till prestanda för kryptovalutan Bitcoin och kan även dra nytta av insatsbelöningar. Staking är processen att låsa kryptotillgångar på blockkedjan för att validera transaktioner. I gengäld genereras en belöning, i det här fallet i form av CORE-tokens, separat och omvandlas till Bitcoin dagligen.

Krypto-ETN är fysiskt uppbackat av Bitcoin och clearas centralt i handeln av Deutsche Börse Groups centrala motpart, Eurex Clearing AG.

NamnISINFörvaltnings-
avgift
Kryptovaluta
1Valour Bitcoin Physical Staking ETPGB00BRBV31240,90 %Bitcoin

Produktutbudet inom Deutsche Börses ETF & ETP-segment omfattar för närvarande totalt 2 278 ETFer, 196 ETCer och 245 ETNer. Med detta urval och en genomsnittlig månatlig handelsvolym på cirka 17 miljarder euro är Xetra den ledande handelsplatsen för ETFer och ETPer i Europa.

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Invesco lanserar tre tematiska ETFer som fångar kraftfulla långsiktiga trender

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Invesco lanserar tre tematiska ETFer för att ge investerare riktad tillgång till kraftfulla långsiktiga trender med artificiell intelligens (AI), cybersäkerhet och försvar. Var och en av de nya Invesco ETFerna kommer att följa innovativa globala riktmärken konstruerade av Kensho, specialistgrenen av S&P Global Index med expertis inom tillämpningen av AI och andra nästa generations teknologier.

Invesco lanserar tre tematiska ETFer för att ge investerare riktad tillgång till kraftfulla långsiktiga trender med artificiell intelligens (AI), cybersäkerhet och försvar. Var och en av de nya Invesco ETFerna kommer att följa innovativa globala riktmärken konstruerade av Kensho, specialistgrenen av S&P Global Index med expertis inom tillämpningen av AI och andra nästa generations teknologier.

  • Invesco Artificial Intelligence Enablers UCITS ETF kommer att rikta sig till företag som är fokuserade på att utveckla och möjliggöra teknik, infrastruktur och tjänster som driver tillväxten och funktionaliteten hos AI.
  • Invesco Cybersecurity UCITS ETF kommer att rikta sig till företag som är fokuserade på att skydda företag och enheter från obehörig åtkomst via elektroniska medel.
  • Invesco Defence Innovation UCITS ETF kommer att rikta sig till företag som utvecklar sofistikerade vapen, defensiva system och andra lösningar för att säkra gränser.

Gary Buxton, chef för EMEA och APAC ETF:er på Invesco, sa: ”Medan potentialen för AI verkligen har fångat människors fantasi, vinner lösningar för cybersäkerhet och försvar nu dragkraft när hot dyker upp över hela världen. För investerare är frågan hur man bäst kan fånga dessa möjligheter idag och i framtiden. Vi valde att arbeta med Kensho för deras intelligenta inställning till att tillämpa AI men också deras expertis i att förstå dessa snabbt utvecklande nya teknologier. Dessutom borde deras deltagande i S&P Global Index-gruppen ge investerare en högre grad av förtroende för administrationen.”

Varje index är konstruerat från ett globalt universum av aktier. Kensho använder naturlig språkbehandling (“NLP”) som en första screeninge för att identifiera företag med potentiell exponering för nyckelbegrepp associerade med varje tema. Kenshos analytiker utvärderar vidare vart och ett av de identifierade företagen och tilldelar temaexponeringar därefter.

Indexen för Artificial Intelligence Enablers och Cybersecurity-teman tillämpar ESG-skärmar för att ta bort företag som antingen är inblandade i vissa kontroversiella affärsaktiviteter, inte följer principerna i FN:s Global Compact eller har ESG-poäng som hamnar under de lägsta 10 % av S&P Global BMI Index.

Chris Mellor, chef för EMEA ETF Equity Product Management på Invesco, förklarade: ”Våra nya tematiska ETF:er skiljer sig från flera nyckelfaktorer. Först handlar det om kostnad. Med 0,35 % per år har de var och en den lägsta – eller gemensamt lägsta – årliga avgifter bland konkurrerande produkter. För det andra handlar det om expertis hos indexleverantören. Slutligen betonar våra ETFer de företag som är mest involverade och kan göra störst inverkan för investerare.”

De kvalificerade företag som identifierats och bedömts av Kenshos analytiker är uppdelade i två kategorier. Företag som klassificeras som ”Kärna” är de med en betydande del av sin affärsverksamhet och/eller intäkter som härrör från produkter och tjänster i linje med temat. ”Icke-kärnföretag” är de som verkar över temats bredare värdekedja och tillhandahåller viktiga insatser som kritiska delkomponenter till slutprodukterna anpassade till temat, men som inte fokuserar på att leverera dessa slutprodukter själva.

En överviktsfaktor tillämpas på gruppen Core-värdepapper för att öka den totala exponeringen mot dessa aktier och betona ren innovation. Inom varje grupp är företagen lika viktade under förutsättning av diversifiering och likviditetsbegränsningar.

Dessa tre nya ETFer utökar Invescos tematiska erbjudanden, som inkluderar ETFer inriktade på global blockchain, bioteknik och ren energiteknik.

ETF-detaljer

ETF namnInvesco Artificial Intelligence Enablers UCITS ETF
Index namnS&P Kensho Global Artificial Intelligence Enablers Screened Index
ETF tickerIVAI
BasvalutaUSD
HandelsvalutaUSD
SFDRArticle 8
Avgift0.35%
  
ETF namnInvesco Cybersecurity UCITS ETF
Index namnS&P Kensho Global Cyber Security Screened Index
ETF tickerICBR
BasvalutaUSD
HandelsvalutaUSD
SFDRArticle 8
Avgift0.35%
  
ETF namnInvesco Defence Innovation UCITS ETF
Index namnS&P Kensho Global Future Defense Index
ETF tickerIDFN
BasvalutaUSD
HandelsvalutaUSD
SFDRArticle 6
Avgift0.35%

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