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WHALE STREET

BTC rallies as finance giants including BlackRock and Fidelity announce new crypto efforts

Some of the world’s biggest financial firms announced major crypto moves this week. Asset-management giant BlackRock filed to launch a “spot” BTC ETF; Deutsche Bank requested permission from German regulators to hold crypto for customers; and a consortium including Fidelity and Charles Schwab launched a new crypto exchange targeting Wall Street. In the wake of the announcements, BTC rallied above $30,000 for the first time since April. 

So what exactly is a “spot” BTC ETF? 

Good question! Exchange-traded funds (or ETFs) are a hugely popular class of financial product that generally track the price of an asset (like gold) or basket of assets (like the S&P 500) and can be bought or sold via conventional brokerages. 

At bitcoin’s 2021 peak, a huge amount of buzz surrounded the idea of U.S.-based ETFs that would buy crypto and sell shares to the public — boosting crypto adoption in the U.S. by allowing investors exposure to the asset class without having to buy or hold it themselves. 

At the time, countries including Canada and Brazil had approved the sale of such “spot” BTC ETFs, sparking hopes that the U.S. would soon follow. Around 30 firms, including Grayscale and ARK Invest, unsuccessfully applied for SEC approval to create similar products. In October 2021 the SEC approved BTC futures ETFs, which hold BTC futures contracts as opposed to holding BTC directly. 

Why is BlackRock’s bitcoin ETF application such a big deal?

BlackRock is the world’s largest asset manager, overseeing around $9.5 trillion, and its spot BTC ETF would be the first in the U.S. if approved by the SEC. Following BlackRock’s lead, firms including WisdomTree and Invesco filed or re-filed similar applications. “[BlackRock’s] filing is being taken as a sign that the SEC might finally give the green light to a physically-backed Bitcoin ETF,” reported Bloomberg. 

Or as Bloomberg analyst Eric Balchunas tweeted: “Fun fact: BlackRock's record of getting ETFs approved by the SEC is 575-1. That's another reason this is so big, they don't play around.” 

Germany’s largest bank has applied for a license that would allow it to hold crypto for customers.

Deutsche Bank, which has around $1.4 trillion in assets, said Tuesday that it had sought permission from German regulators to operate a digital asset custody service, which would allow it to hold crypto for customers. The multinational banking giant has had plans for such a custody service since at least 2020. German regulators have generally been open to the crypto industry — the country’s chief finance regulator has issued at least six crypto-custody licenses (and 14 provisional permits) since 2021.

Charles Schwab, Fidelity, and Citadel have launched a new crypto exchange for institutional investors.

EDX, a new crypto exchange backed by the three Wall Street giants, launched on Tuesday. The platform is non-custodial, meaning EDX won’t hold customer funds, and any transfers of crypto and cash between parties will take place using custodians and third party banks.

Only bitcoin, bitcoin cash, litecoin, and ether are available to trade on the platform. EDX won’t serve individual investors directly, but expects that retail brokerages will route customers’ orders through their platform.

The bottom line… 

Global-finance giants take a long view — and even with U.S. regulatory uncertainty impacting markets in recent months, institutional investors are continuing to invest in the space, demonstrating a long-term belief in crypto. According to a recent global survey of 303 institutional investors (who manage a collective $4.9 trillion), 82% of respondents had a positive outlook on BTC and ETH, and 88% were considering investing in digital assets. 

I WANT MY NFT

Sotheby’s sells $11 million in NFTs as Napoleon Dynamite cast reunites for NFT-funded pilot

Nothing symbolized the peak of crypto’s last bull run in 2021 like the supercharged market for NFTs — with Beeple’s $69 million auction sale and Bored Ape Yacht Club’s $1 billion-plus market cap capturing headlines around the globe. The recent story has been less bubbly, with NFT trade volumes and user numbers down sharply in the first quarter of 2023. But as we roll into summer, the NFT market might just be showing signs of life. Let’s break them down. 

• A Sotheby’s auction sold $11 million in crypto art. The June 15 event, Grails Part II, focused on better known NFTs from the collection of the failed hedge fund Three Arrows Capital. According to ArtNet, more than half of the buyers were under 40, and more than 60% were new Sotheby’s customers. The biggest seller? Dmitri Cherniak’s algorithmically generated artwork Ringers #879 (The Goose), which went for around $6.2 million to anonymous NFT whale 6529. 

• The cast of Napoleon Dynamite reunited for the NFT-crowdfunded pilot of an animated series called Cyko KO. (The NFTs grant holders the right to watch the finished episode.) “‘Napoleon’ was very similar,” recalled the 2004 indie comedy’s lead, Jon Heder. “‘Napoleon’ couldn’t have gotten its success without those original fans. It was taking that journey with them. Nobody knew where it was going.”  

• Louis Vuitton began selling a line of NFT “treasure trunks” for around $41,600 each on June 8, promising holders access to unique real-world products and experiences. The project is built on a blockchain called Aura, which Louis Vuitton’s parent company LVMH launched in 2021 with partners including Mercedes Benz with the goal of combating luxury-goods piracy. (On the opposite end of the opulence spectrum, Slim Jim is giving away 10,000 NFTs that unlock access to a website called the “Meataverse.”)  

Why it matters… While it’s way too early to say if crypto winter is actually thawing out for the NFT market, the technology of NFTs continues to evolve. In early May, the Bitcoin blockchain’s number of daily transactions hit an all-time high, driven by the popularity of “Bitcoin Ordinals” — a protocol that allows users to create and share NFTs by “inscribing” data onto tiny fractions of a bitcoin. This week, a similar protocol built on the Ethereum blockchain was launched — and according to developer Tom Lehman (the former CEO of Genius.com) around 130,000 “Ethscriptions” were created in just the first 13 hours. 

NUMBERS TO KNOW

$5 trillion

The potential value of “tokenization” — or converting real-world assets into blockchain-based tokens — over the next five years, according to a new research report from wealth manager Bernstein. The firm notes that much of this opportunity could be led by stablecoins, central bank digital currencies, and real estate.

$125 million

The amount that crypto short traders (those betting prices would decrease) lost in the past week after a 10% surge in crypto’s total market cap on the back of major cryptocurrency headlines (see first story) from Wall Street titans like BlackRock and Fidelity.

31%

The percentage of Australians between the ages of 18 and 24 who hold or have traded cryptocurrencies over the last year, according to a new study from the Australian Securities Exchange.

1 in 5,500

Estimated odds a lucky amateur miner overcame last week to add a new block of data to Bitcoin’s blockchain and claim a 6 BTC block reward (worth about $160,000 at the time). In Bitcoin’s early years, anyone with a decently powerful PC could feasibly participate in mining; these days the industry is powered by vast mining farms full of specialized equipment. Individuals are still welcome to join the network, but the odds of winning against corporate miners are extremely long. 

TOKEN TRIVIA

What is the ticker symbol for the U.S.’s first Bitcoin futures ETF?

Find the answer below.

Trivia Answer