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The big firms making crypto moves

The big firms making crypto moves

In July, major institutions set a high watermark for 2022 by investing $474 million into crypto markets. [Image via Sirisvisual]

There’s never a dull moment on the blockchain. Here’s what you need to know this week:

BlackRock partnered with Coinbase for institutional crypto trading. Plus, other major multinational firms are making moves amid the crypto downturn.

Key quotes from the cryptoverse. Mark Cuban had some choice words about buying digital land, and Michael Saylor recounts finding his laser eyes.

Noteworthy numbers. The total number of crypto ATMs around the world and other key figures to know this week.

WHALE WATCH

BlackRock, MicroStrategy, and the institutional giants making crypto winter moves

Is the worst of the crypto downturn over? Since dropping to 2022 lows in mid-June, the crypto market has been staging a gradual recovery as its total market cap has reclaimed the $1 trillion mark and Bitcoin is up more than 20% from its sub-$18,000 levels nearly two months ago. Another sign of momentum: institutional investors, including some of the world’s largest banks and asset managers, put a total of $474 million back into the crypto market in July, a high watermark for the year, and nearly a complete reversal of June’s $484 million of outflows. Let’s take a closer look at how some of the biggest firms are navigating choppy seas.

  • BlackRock, which oversees $10 trillion and is the world’s largest asset manager, partnered with Coinbase to help institutional clients trade and manage crypto. Coinbase’s institutional brokerage, Coinbase Prime, will connect with BlackRock’s portfolio management software, Aladdin, to provide institutional investors with direct access to crypto trading, beginning with BTC. The vast scale of this deal between the worlds of digital assets and traditional finance prompted one analyst to note, “This is much-needed positive news … and should provide some optimism for the longer-term health of the cryptoverse.”

  • Michael Saylor, who turned his software company, MicroStrategy, into the U.S.’s largest corporate BTC holder, stepped aside as CEO to “focus more on Bitcoin” as the firm’s executive chairman. The outspoken BTC advocate announced the move as MicroStrategy reported a 2.6% revenue decline from the previous year and a $918 million “impairment charge” on its digital assets, fueled by the recent crypto downturn. Saylor, who was the firm’s founding CEO in 1989, said his new role will enable the company to “better pursue [its] two corporate strategies” of acquiring BTC and growing its software business. MicroStrategy President Phong Le has assumed the CEO role and added, “If we have excess cash, we’ll put it into Bitcoin, and we’ll hold.”

  • Bank Of America, the second-largest bank in the U.S., released a new report asserting that blockchains have “intrinsic value” and rejecting recent claims to the contrary.Citing Ethereum’s transaction (gas) fees — which are generated when transactions are validated on its blockchain or via DeFi apps (like Uniswap) that run on its blockchain — BofA noted that the second-biggest blockchain produced roughly $10 billion in gas fees in 2021, which was up 1,558% from the year before (though fees have declined so far this year). Meanwhile, both Morgan Stanley and Citigroup recently posted crypto-specific jobs to build out digital asset products and improve DeFi risk management, respectively.

  • European asset manager Brevan Howard raised $1 billion from institutional investors to launch one of the largest-ever crypto hedge funds. Though web3-focused VC firm Andreessen Horowitz holds the fundraising record with their $4.5 billion crypto fund, Blockworks notes that Brevan’s capital is “by far the largest commitment to crypto by a traditional finance asset manager.” Meanwhile the former crypto head at accounting giant PwC raised $75 million for a new institutional crypto asset management firm in Dubai; and the CME Group — the world’s largest derivatives exchange — is preparing to launch Euro-denominated futures for BTC and ETH at the end of August.

Why it matters… Wall Street’s entrance into the cryptosphere was a key catalyst for the massive 2020-2021 bull run, so what could the last month of institutional money flowing back into the market mean for the future? Depends who you ask. J.P. Morgan, the U.S.’s largest bank, released a cautiously optimistic note on Monday, stating “It appears that the crypto markets have found a floor.” Others, like Blockchain Association executive director Kristin Smith are trying to think a few steps ahead about what greater institutional participation might mean for the industry at large. As Smith puts it, ​“Greater adoption necessitates a regulatory framework for crypto, and I’m optimistic we’ll finally see much-needed legislation in 2023.”

TAKES

Mark Cuban’s hard pass on virtual real estate and other key crypto quotes from this week

Real (estate) talk… Billionaire crypto enthusiast Mark Cuban made it clear that his enthusiasm does not extend to buying digital land in the metaverse. “That’s the dumbest sh*t ever,” he declared during an appearance on the YouTube channel Altcoin Daily. The market for virtual real estate has seen prices plummet so far this year amid the larger crypto downturn. 

Major laser... “No one had the cojones to buy $250 million of bitcoin with cash,” was how outgoing MicroStrategy CEO, and laser-eyed legend, Michael Saylor described to Axios the moment in August, 2020 that he became a Bitcoin bull by investing half of his company’s corporate reserve in BTC. (His Twitter profile picture was updated with laser eyes shortly after.) “I feel better about it today than I did on the day we started,” he recently told The Wall Street Journal. 

Put a fork in it… As the long-anticipated (and long-delayed) Ethereum merge approaches completion, a well-known crypto miner suggested forking the network to maintain its original proof-of-work system, rather than transitioning to the new proof-of-stake network. But the proposal was met with skepticism by Ethereum co-founder Vitalk Buterin. “I'm not expecting it to have substantial, long-term adoption,” he said.

In good company… “Digital assets are a transformative innovation on par with the internet, cars, and electricity,” was the conclusion of a new report from Wells Fargo Investment Institute titled “Digital Assets – A World of Possibility.” The report is part of an ongoing digital asset and cryptocurrency educational series exploring the creation of what the report calls “the Internet of Value.”

NUMBERS TO KNOW

$6.8 billion

The size of the pension funds overseen by the Fairfax County Retirement Systems in Virginia, which followed through on plans to invest $70 million in crypto lending markets – a DeFi “degen” strategy known as yield farming — despite recent volatility in the sector, most notably the collapse of the Terra stablecoin. According to the chief investment officer of one of the funds, yield farming presents an attractive opportunity at the moment in part because “some of the people have stepped back from that space.” 

$4.1 million

The estimated value of assets that were drained from more than 9,000 Solana wallets during a widespread hack last week. The attack was ultimately traced back to an exploit of the Slope mobile software wallet, according to Solana, which reported that “private keys for the affected wallets had been leaked or compromised, and were used to sign malicious transactions.” The Solana team currently recommends Slope users generate new seed phrases in a different wallet app and abandon old addresses.

39,000

The approximate number of cryptocurrency ATMs available across 78 countries, according to Coin ATM Radar. Crypto ATMs have seen hockey-stick growth in recent years, with the amount of ATMs increasing more than 600% since the beginning of 2020. But the global distribution is heavily weighted toward North America, which accounts for 95% of all crypto ATMs worldwide. 

2

That’s the number of web3-embracing luxury brands that announced they’re now accepting the Bored Ape Yacht Club’s ApeCoin token as payment for their goods. At Gucci, ApeCoin joins a dozen other cryptocurrencies accepted at the fashion brand’s stores; at Tag Heuer, shoppers can now use APE to purchase the watchmaker’s Calibre E4 digital watch, which allows you to display your NFTs on its face.

2 CHAINS

Will layer 2 solutions eventually overtake Ethereum?

Layer 2 scaling solutions help make Ethereum, a layer 1 blockchain, operate more efficiently by adding more capacity on top of the network. But is it possible that these L2s could, over time, capture more of the economic activity than their L1 host? That’s the question explored in a new report from David Duong, head of Institutional Research at Coinbase, entitled “Could L2s eat Ethereum’s lunch?” which analyzes what such a change could mean for everything from staking to security on the Ethereum blockchain.

TOKEN TRIVIA

Ethereum Classic (ETC) is an example of which of the following?

A

Soft fork

B

Hard fork

C

Side fork

D

Salad fork

Find the answer below.

Trivia Answer

B

Hard fork