Blockstone Capital Weekly Digest: Friday 7 July 2023
Updated: Jul 18
Sentiment remained generally positive this week, largely thanks to some kind words from BlackRock CEO Larry Fink. During a televised chat on Wednesday, Fink gave Bitcoin perhaps its biggest ever endorsement from a major institutional player, with his favourable remarks briefly propelling Bitcoin above $31.3K – its highest level since June 2022.
Bitcoin, however, failed to establish itself above this key level. In the same 24-hour span, the Federal Reserve released minutes from the June FOMC meeting which suggested that although markets should expect the pace of rate hikes to slow, there may be more hikes throughout the year. This revelation put a strain on markets across the board, causing Bitcoin to regress back to a $30K footing by Thursday.
Ethereum, meanwhile, hit a high note of $1.9K on Monday, before steadily sliding down to a week's low of $1.8K today. At the time of writing, the combined market cap of all crypto assets is around $1.18T – a minor bump up by 0.85% over the week.
The pursuit of spot ETF approval for digital assets remains a focal point for the market, with Nasdaq refiling a 19b-4 form for the iShares Bitcoin Trust, a spot bitcoin ETF with BlackRock at the helm. The move echoes last week's filings from the likes of the Cboe exchange, WisdomTree, VanEck, and Invesco.
Attention this week was also on regulatory developments in the Asian crypto market. Authorities in Singapore now mandate crypto firms to hold customer assets in third-party trusts, while both Singapore and Thailand put the brakes on crypto lending and staking services. Over in South Korea, legislators approved a bill to protect digital asset investors, marking the first step towards a crypto-specific legal framework. Meanwhile, Hong Kong continues to steadily encourage crypto adoption, demonstrated by its recent move to set up a Web3 task force.
Carl, Vegard and Yev
BlackRock’s Larry Fink praises Bitcoin in TV interview
Barely a fortnight after BlackRock’s spot Bitcoin ETF filing, the firm’s CEO appeared on Fox News to discuss the transformative potential of Bitcoin in financial markets. In the interview, Larry Fink called Bitcoin an ‘international asset’, a digitised version of gold, and a hedge against inflation and devaluation of fiat currencies.
These remarks mark a significant departure from his 2017 remarks, where he linked Bitcoin to money laundering.
Fink’s dramatic shift in perspective, coupled with Blackrock's application for a spot BTC ETF, signal a major turning point in the financial industry that could lead to more recognition of digital assets as a legitimate asset class. Importantly, for investors yet to delve into digital assets, BlackRock's pursuit of a Bitcoin ETF and Fink's endorsement of
Bitcoin as a digital gold should serve as a wake-up call.
Here at Blockstone Capital, we share the crypto industry's celebration of Fink’s shift in perspective, as it highlights the strides made in recent years to onboard users into digital assets and broaden understanding of the sector. However, we caution against complacency spurred by these recent victories.
The digital asset sector has evolved far beyond a small corner of the internet to become a bustling and dynamic ecosystem. With this growth comes responsibility for all participants. We must carefully consider the projects we bring to market, the causes we advocate for, how we market ourselves, and how we represent the space.
Fink's positive remarks about Bitcoin underscore the readiness of the world's largest financial institutions for the era of digital assets and tokenisation. However, this also means that the crypto industry must work harder to: 1) continue increasing awareness and understanding of the benefits of digital assets, 2) bring to light fraudulent projects so regulators can weed out the bad actors, and 3) continue to make market structure changes to better serve crypto investors and the broader industry.
Binance trading volume dropped by 70% in Q2 2023
Binance’s position as the leading crypto exchange stands on shaky ground as fresh research from Kaiko indicates a nearly 70% dip in the platform's spot trading volume in the second quarter of 2023.
While Binance registered the strongest drop in trading activity, other platforms like Coinbase, Kraken, OKX, and Huobi also saw their trading volumes nosedive by over 50% in Q2, reaching their lowest point since 2020.
Binance's sharp market share shrinkage stems from a tough year for both its international and US platforms, primarily due to regulatory challenges. These regulatory issues include allegations by the US SEC that Binance violated federal securities law. This legal tussle has significantly impacted Binance's global market share, which plummeted from 60% at the year's start to 52% last month. As you might expect, Binance.US’ market share was hit even harder, plunging from over 22% in April to a mere 0.9% on June 26.
In Europe, Binance has parted ways with its Euro payment partner and withdrawn from multiple markets. Internally, the exchange is seemingly facing an uphill battle in retaining key personnel. According to a report from Fortune yesterday, top executives have recently resigned due to increased regulatory scrutiny on the company and its CEO.
Criticism aimed at Binance's CEO, CZ, coupled with the escalating regulatory troubles, have led to speculation that CZ might step down to help Binance weather the storm. Some see Richard Teng, a rising executive at Binance, as a potential successor.
Despite facing a seemingly ceaseless cascade of challenges, Binance still dominates as the largest crypto exchange globally. However, losing market share by this extent could be a sign that huge shifts could be looming in the digital asset ecosystem.
Roundup of other key developments
Crypto funds saw over $120m in inflows last week.
Circle considers issuing stablecoin in Japan under new rules.
CFTC investigators conclude ex-Celsius CEO Mashinsky broke US rules.
Gemini's Cameron Winklevoss tweets $1.5bn ‘final offer' in debt talks over crypto firm Genesis.
Revolut is delisting Polygon, Solana and Cardano tokens in the US.
FBI reportedly searched Kraken co-founder’s home in March
Kraken ordered by court to turn over history translation and account information to IRS.
Citigroup is reportedly reviewing its partnership with digital asset custodian Metaco.
Israeli lawmakers seek to exclude foreigners from crypto capital gains tax.
Crypto exchange Bitfinex recovers $314K from 2016 hack.
Ethereum Layer 2 network Starknet plans 'Quantum Leap' upgrade on July 13.
Crypto-friendly DBS Bank launches digital yuan transaction tool.
Saxo Bank ordered to liquidate its crypto holdings by Danish regulator.