Well, the ProShares Bitcoin Strategy ETF mainly.. with record ‘natural volumes’ of $BITO changing hands. It’s been the ‘incredibly bullish week’ Sam Bankman-Fried suggested and the markets continue to hit new highs amidst funds and protocols successfully raising funds, L2 TVLs surging and rising excitement in the NFT world. Even TradFi fixed-income giant Pimco is ‘embracing cryptocurrencies’, with Capital Group also following suit. We’ve almost completed the third week of October 2021 in the burgeoning Digital Asset ecosystem; let’s unpack the good news.
1. Trailblazing BITO
Not only was the first Bitcoin futures ETF [ProShares Bitcoin Strategy ETF] $BITO launched on Tuesday of this week to explosive demand post the SEC’s approval last Friday, it went on to gather more than $1.1bn of assets by last night’s US close [in 2 days]. Interestingly, this broke GLD’s [the gold ETF] 18-year-old-record of 3 days according to Eric Balchunas, Bloomberg Senior ETF analyst. It also drew more attention to the ‘Dump Gold, Buy Bitcoin’ narrative for inflation hedgers / portfolio diversifiers, with $10bn of funds exiting GLD this year.
Bearing in mind some analysts are suggesting the futures-based Bitcoin ETF could attract more than $50 billion in inflows in its first year, there is understandably a flurry of activity, with Valkyrie set to launch on the Nasdaq imminently and interest from Galaxy Digital, VanEck, ETF Series Solutions and ARK Invest.
However, in spite of the exuberance, it’s important to remember these ETFs are still based on Bitcoin futures, rather than the underlying $BTC. For sophisticated investors, it makes sense to just buy Bitcoin.
The question also arises, how long will crypto ETFs be around? Cathie Wood of ARK Invest passed on $BITO citing tax ramifications… and as Matt Levine succinctly points out in his recent opinion column:
“Eventually crypto will take over traditional finance or traditional finance will take over crypto or everyone will just be comfortable transacting in both, and an ETF of synthetic Bitcoins will look sort of quaint.”
2. Raise ‘em up
Every day there’s a new successful fundraise from a new or established project. The past week has been no exception with some big raises in the crypto space: FTX [exchange] just announced a $420m raise at a $25bn valuation [FYI the NYSE market cap is $73bn], Galaxy Digital [multi-service digital asset firm] raised $325m for an NFT & gaming fund and Copper [custodians] are reportedly gearing up for a $500m expansion raise (!)
Back in June, it was reported that VCs have poured $17bn into crypto investments so far this year; that number must be close to $20bn+ by now. TVL in DeFi has surpassed $100bn on the Ethereum chain [DeFi Pulse] and digital asset investment products AUM [Assets Under Management] are now above May’s highs of US$71.6bn - at US$72.3bn this week, according to CoinShares.
With each new institution that embraces and adopts digital assets, the more capital that is allocated into this burgeoning space and the more assets that can find their way into DeFi.
Right now, it definitely feels like #UPONLY. Taking into account where the whole space was at the beginning of 2020, it is no wonder every other cafe conversation is revolving around crypto…
3. Crypto going Mainstream
The biggest story of the year and probably the decade: How Crypto Went Mainstream.
We’ve all heard the 10,000 Bitcoin pizza story. Bitcoin was super obscure in May 2010, with 10,000 BTC fetching a value of $41. Yes, $41. There weren’t really any exchanges. Bitcoin moved around on hard drives etc.
It took a short 10 years for that to garner a value of $350 million [~$650 million today] as Metcalfe effects kicked in and retail adoption & finally institutional adoption broadened. Yet even today, the total market cap of the whole digital asset space is just $2.5 trillion with Bitcoin dominance at 46.5% [CoinMarketCap]. We still have a long way to go beyond the autodidacts and technologically-minded population, even if PayPal has made crypto purchases possible, which is a significant facilitator.
This is why after FTX’s naming rights deal for the Miami Stadium earlier this year, countless influencer & celebrity accounts recently jumped aboard the crypto wagon to spread the [sponsored] word, and the press-dominating NFT boom that’s still BOOMING, Fred Wilson’s short piece about Coinbase becoming the official partner of the NBA yesterday was notable:
“We started looking at crypto ten years ago, starting investing nine years ago, and have had a front-row seat to its development ever since. It has been enlightening, exciting, rewarding, but definitely not mainstream. … Though I am on the board of Coinbase, I had not been aware of this partnership until I saw the tweet. Seeing it made my day. Two of my favorite brands in the world are teaming up to educate and increase the awareness of crypto around the world.
That’s going mainstream right there.
And now for some DeFi 2.0 discussion..
We touched on the emergence of DeFi 2.0 last week. It is a buzzword that has started to pick up velocity through the clever marketing tactics of Olympus DAO, FEI, and most recently Tokemak. It all comes down to changing the way protocols bootstrap networks; whereas DeFi 1.0 was all about Liquidity Mining programs, DeFi 2.0 is about Protocol Controlled Value and turning the status quo on its head.
We have a lot of time for the Bankless team and this short discussion makes for a great watch!
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