As noted previously, now that Jamie Dimon has relented and will not fire any JPM employee caught trading bitcoin but instead is encouraging them to cover (and trade) the digital currency sector in response to growing client demand for more exposure, the bank recently launched a weekly cryptocurrency report which covers the main developments and updates in the space. So without further ado, here is what JPM found was particularly notable in the crypto newsflow this past week as the total market cap of the crypto sector continues to flirt with $2 trillion.
- Bitcoin and Ether prices rise slightly in the week. The price of Bitcoin rose by 5% w/w to $46.7K while Ether rose by about 3% w/w to ~$3.1K. During the week, Bitcoin exceeded $48K while Ether briefly exceeded $3,300.
- Major cryptocurrency volumes decline w/w. While the prices of the two major cryptocurrencies increased slightly w/w, volumes actually decreased sharply. The average daily volume (ADV) of Bitcoin and Ether fell by 12% and 21%, respectively. However, the ADV of cryptocurrencies including Ethereum Classic and Dogecoin each rose by ~40% from the prior week.
- Gensler says that DeFi projects are not immune to regulation. SEC Chairman Gary Gensler said in an interview that DeFi projects including digital asset exchanges, which are largely unregulated today, have characteristics that make them look similar to the types of firms that the SEC currently watches over.
- Walmart looking to hire crypto expert. The new hire would have expertise in cryptocurrencies and blockchain and would lead Walmart’s digital currency strategy.
- Wells Fargo and J.P. Morgan register passive bitcoin funds for high net worth clients. According to regulatory documents, NYDIG and FS Investments are partnering with Wells, which receives a portion of the fund’s sales. This follows J.P. Morgan, which on Thursday also registered a passive bitcoin fund with the SEC.
- Crypto traders looking for compensation after major outage on Binance. Hundreds of crypto traders that used Binance are expected to seek damages after they lost money when Binance, the largest cryptocurrency exchange by volume in the world, suffered a major outage in mid-May.
Key Crypto adoption/offering developments in the past Week, include:
- i) Well Fargo registering a passive bitcoin fund with the SEC in partnership with NYDIG and FS investment to serve as an indirect crypto investment vehicle for some of the bank's wealthy clients (the news follows JPM's own filing for a passive bitcoin fund;
- ii) Coinshares reported that investors redeemed $22MM from crypto funds in the past week, marking the six straight week of outflows and the longest stretch since Jan 2018;
- iii) Galaxy Digital became the latest to file a bitcoin crypto futures exchange in keeping with Gary Gensler's reco to focus on the futures space for ETFs instead of spot and
- iv) Coinbase announced a partnership with Japan's largest bank, Mitsubishi UFG to launch Coinbase Japan.
Key regulatory updates in crypto include:
- i) Korea's financial service commission conducted an inspection of 25 crypto exchanges for their readiness to meet new regulatory requirements going into effect next month. It found that no exchange fully meets the requirements.
- ii) SEC Chair Gary Gensler said that DeFi projects are not immune to regulation. Gensler said DeFi projects that reward participants with digital tokens or similar incentives could cross the line into regulated activity. The SEC also brought an enforcement action against DeFi firm, Blockchain Credit Partners
- iii) the Arab Monetary Fund issued a guide titled "Strategies to Adopting DLT/Blockchain technologies in Arab Countries" to develop a fintech industry and support digital financial transformation in Arab countries.
- iv) the Bank of Thailand's planned retail central bank digital currency (CBDC) is set to be designed as non-interest bearing to prevent the CBDC from adversely impacting monetary policy and local financial stability. The Pilot test for the CBDC is expected in Q2 2022.
Finally, on the crypto adoption by non-fin service companies we find that:
- i) Walmart posted a job opening for a cryptocurrency expert to shape its blockchain strategy. The recruited person will be responsible for "developing the digital currency strategy and product roadmap" and identifying "crypto-related investment and partnerships." Most importantly, the recruited person will look at a "broad set of payment options for customers."
- ii) Microsoft recently published a whitepaper employing the Ethereum blockchain to combat digital piracy. The company claimed it as the "first public anti-piracy system" which will allow digital piracy informers to maintain anonymity while maintaining transparency for the wider public.
- iii) US Army engineers are employing blockchain technology for a new tactical-level data management capability. The technology will provide army officers "a mathematical, verifiable way of vetting their data from sensor to shooter and producer to consumer."
- iv) Alibaba recently launched a marketplace for NFTs which will allow trademark holders to sell tokenized licenses of their intellectual properties. The marketplace will target musicians, writers, artists and game developers.
VC Corner: Key Blockchain/Crypto VC Investments
- Bitpanda (8/17): Austrian cryptocurrency broker Bitpanda reached a $4.1B valuation after raising $263mm in its Series C funding round led by Valar Ventures. The proceeds are likely to be used to further expand internationally and develop its team. Four new executives were hired as a part of this expansion. (link)
- Figment (8/16): Figment, a crypto staking service provider, raised $50mm in a Series B round led by Senator Investment Group and Liberty City Ventures. The latest round of funding, which also saw participation from Galaxy Digital, Anchorage, and Declaration Partners, values Figment at $500mm.The proceeds will be used to further expand its services and increase headcount. (link)
- Philippines Digital Asset Exchange (8/17): PDAX, a crypto platform, raised $12.5mm in an additional funding round from eight investors including Ripple, 100x, and CMT Digital to develop its new trading app bonds.ph. The company plans to use the funds to expand the app’s capabilities by allowing support for new tokens and other digital assets. (link)
Global Crypto Market Size and Landscape
The size of the global market increased in the past week, with the global crypto sector’s market cap rising 2.8% w/w from $1.86 trillion to $1.91 trillion as of 8/19.
Cryptocurrencies Trading Volumes
Bitcoin’s 7-day average daily volumes stand at $32.3B, which compares to that of Ether at $23.1B. Over the past week, Bitcoin’s trading volumes have decreased 11.8% w/w while Ether’s trading volumes have decreased 21.4% w/w. However, each of the major cryptocurrencies’ trading volumes have risen over the past month but have decreased over the past 6 months (with only Ethereum Classic and Dogecoin seeing a rise).