Blockstone Capital Weekly Digest: Friday 14 July 2023
Updated: Jul 18
In a week dominated by regulatory developments, Celsius’ Alex Mashinsky was arrested on Thursday and charged with fraud by the US DoJ, SEC, CFTC, and FTC. Allegations were wide-ranging, and include price manipulation of the CEL asset, misrepresentation, and wire fraud.
News of Mashinsky’s arrest was shortly eclipsed by a federal judge issuing a long-awaited ruling in the SEC’s landmark case against Ripple, saying some sales of Ripple’s XRP token did not constitute illegal securities sales.
Shares in Coinbase soared 25% after the ruling dropped, marking the largest daily gain in the stock's history. XRP led gains in the crypto market, with the asset rising 78% over the past 24 hours and reclaiming the 4th largest crypto by market cap position. Several other assets, such as Solana, Polygon and Cardano – all of which the SEC deemed unregistered securities in previous lawsuits– have surged more than 20% since yesterday’s ruling. At the time of writing, the total market value of all crypto assets sits at $1.26T, up by approximately 7% on the week.
Ethereum notably crossed $2K for the first time in two months. However, despite this climb, the asset still finds itself 59% below its record high of $4,878, a peak achieved in November 2021.
Bitcoin, meanwhile, continues to hover around the $31K mark in the wake of renewed efforts to launch spot Bitcoin
ETFs in the US, and ahead of Europe’s first spot Bitcoin ETF, slated to launch on Amsterdam’s Euronext later this month. Investors also appear to take comfort in new data from Block Scholes, indicating that Bitcoin’s 90-day correlation against equities in the S&P 500 index has dropped to 0.09, its lowest level since June 2021.
As digital assets continue to anchor their position in our financial future, the message is clear: The crypto economy is here to stay, and investors who capitalise on this sector’s growth potential early on, could benefit greatly from the long-term appreciation of crypto assets.
Regards, Carl, Vegard and Yev
Ripple wins a ‘partial victory’ against the SEC
Thursday 13 July will go down as a historic day in the long-standing three-year legal dispute between Ripple and the SEC.
A federal court approved Ripple's motion for summary judgement, stating that selling XRP tokens on exchanges is not an investment contract. Critically, Judge Analisa Torres dismissed the SEC’s allegation that Ripple conducted a $1.3bn unregistered securities offering.
However, the court determined that the institutional sale of XRP did breach federal securities laws. This could potentially pose difficulties for Ripple, as the firm has several billion dollars in institutional sales that it’s on the hook for. You can read the 34-page order for yourself, here.
While some observers might debate whether Ripple had ‘won or lost’ in this decision, the market has voted convincingly with a win as digital asset prices across the board soared. Just a few hours after the ruling, the XRP market cap rose a staggering $21.2bn to reach a new yearly high of $46.1bn. At the time of writing, Ripple’s market capitalisation has stabilised to around $41.6bn.
It’s important to note that the summary judgement is obviously not the last word on the issue, and an appeal is almost certain. However, this outcome – hailed by Coinbase a ‘partial win’ for Ripple – carries huge implications for the broader digital asset market as it challenges the SEC’s stance on the classification of crypto assets as securities. Jude Torres’ ruling could also be cited in current and future motions to dismiss cases filed by the SEC, such as the ongoing case against Coinbase. It could also add confidence to Grayscale's fight with the SEC over its ETF.
In the wake of the decision, major crypto exchanges, including Coinbase, Gemini, and Kraken, have all resumed XRP trading. Ripple’s reduced regulatory risk and the re-availability of XRP on leading exchanges are restoring confidence for investors seeking to diversify their portfolios.
In closing, the ruling caps off a rather challenging week for the SEC. Beyond this legal setback, which threatens the credibility of the agency to efficiently regulate the US crypto market, six members of the US Congress have called for an investigation into the SEC over the Special Purpose Broker-Dealer (SPBD) licence it recently granted to Prometheum.
Standard Chartered expect Bitcoin to hit $120K by end of 2024
According to Standard Chartered Bank, Bitcoin's price is poised to rise to $50K this year, paving the way for an even more impressive climb to $120K by the close of 2024. This suggests an almost 400% escalation from Bitcoin's present value.
Standard Chartered outlines several factors they believe will drive an increase in Bitcoin's value in the coming months. Chief among these is the anticipated scarcity of Bitcoin after the scheduled halving event in 2024.
At Blackstone Capital, our assessment aligns, to some extent, with Standard Chartered's optimistic forecast for Bitcoin. We indicated in our recent investor letter that, based on our analysis of previous cycles, we anticipate Bitcoin potentially reaching a price target of $125K by the end of 2024.
Our projection is predicated on the concept of an optimal 5% diversification threshold within a portfolio. Supposing an $8T asset manager applies for an ETF, and its CEO, Larry Fink, advocates for Bitcoin as a gold-like asset on live television, a significant cash inflow of $0.4T could be expected from this entity alone. It's notable that a market shift of roughly 9% was induced by an influx of less than $0.5 billion just last month, a dynamic that contributes to our forecast of a 10x upside potential for this asset class.
Several market indicators suggest that a fresh bull run may be on its way for Bitcoin. One compelling sign this week is the Bitcoin hash-rate, which recently reached a new record high. The record-breaking hash-rate reflects the growing interest and confidence in the network. As miners contribute more computational power, it reinforces the stability and security of the Bitcoin ecosystem.
Roundup of other key developments
Circle cuts workforce, ends certain ‘non-core' activities.
Hedge funds are showing robust interest in crypto: PwC.
Jacobi Asset Management to launch Europe's first spot bitcoin ETF this month.
Around 9.8K Silk Road Bitcoin starts moving in unconfirmed transactions.
European regulator releases consultative paper on MiCA standards for crypto asset service providers.
Dubai crypto regulator suspends BitOasis crypto exchange license.
Coinbase unveils decentralised messaging in wallets with XMT.
Coinbase CEO Brian Armstrong asks Twitter followers if their BofA accounts were closed because of crypto transactions.
Russian parliament passes digital ruble bill.
South Korea to ask firms to disclose crypto holdings from 2024.
Former security engineer arrested in NY after allegedly defrauding a DeFi exchange, stealing $9m.
Arkham Intelligence rolls out controversial crypto data marketplace.