Institutional activity dominates digital asset markets headlines...
Digital Asset Markets – the week that was Edition 34, 28 March 2022
Institutional activity dominates digital asset markets headlines...
In the space of a week Goldman Sachs, Bridgewater Associates, Andreesen Horowitz and ANZ Bank all feature in digital asset market headlines. Perhaps it’s no surprise to see Goldman Sachs transacting for clients having established a presence in digital asset markets some eight or so months ago. Who would have thought ANZ Bank would launch an Australian Dollar based stablecoin driven by transactional demand from a long established Australian family office active in the digital asset markets. Only hindsight will demonstrate the threshold of institutional acceptance of digital asset markets, but this week suggests that point is likely within 2022.
Markets and sentiment
The markets have absorbed last week's Federal Reserve's moves with enthusiasm. Strangely, the Fed has provided a bedrock of certainty around which investors have returned to equity markets driving equity markets in the US to levels prior to the Ukraine invasion.
US Bond markets have struggled, and the 200+ basis point moves in yields over six months represents one of the most significant moves in history, with the current quarter setting up as the worst in history.
Now that we know the Fed will hike at every meeting this year, and possibly for more than 25 basis points at more than one meeting the focus may shift to the Fed balance sheet and withdrawal of liquidity. Consensus suggests it is an event for the second half of the year with the out of consensus call with Goldman Sachs who suggest the balance shrink will begin to shrink in just two months (May). If investors continue to underpin positive performance in equities, they risk a feedback loop that will make the Fed's task easier!
Digital asset markets have been more buoyant with some suggestion Russia and its oligarchs may seek to use the digital asset markets to facilitate movement and transfer of funds. This writer is sceptical. Regardless the earlier comments on traditional institution and investor engagement assures there is favourable funds flow ahead in 2022.
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What has our attention?
Goldman Sachs executes trades in crypto options and expands their digital assets teams. The trade executed with an over the counter (OTC) non deliverable option traded linked to the price of BTC. The 'non deliverable' component means that GS don’t have to solve for digital asset custody and settlement but rather can execute on their existing platforms for OTC derivatives. In the same week Bridgewater Associates, the world’s largest hedge fund with $150 billion in assets is preparing to back its first crypto fund.
Former Andreesen Horowitz (a16z) partner Katie Haun, who only four years earlier was a federal prosecutor, has 'solo' launched a new crypto assets venture fund with $1.5 billion in assets. The manager will launch a $500 million early-stage vehicle and a $1 billion acceleration fund. Haun has already made investments in Autograph, OpenSea, Aptos, and Moonwell. Andreessen is a limited partner in at least one of the new funds.
NFTs
The team behind the blue-chip Bored Ape Yacht Club and Mutant Ape Yacht Club NFT collections, Yuga Labs, has raised $450 million at a $4 billion valuation. The Yuga Labs team said the money would go, in part, toward the Metaverse project it has in the works, Otherside.
Andreessen Horowitz led the round. Andreessen Horowitz’s Chris Dixon, said, “To me, Yuga Labs, combined with these other emerging [Web3] companies, are an important counterweight to companies like Meta. There’s a dystopian future where Meta is this kind of dominant digital experience provider, and all the money and control goes to that company.”
The Bored Ape Yacht Club non-fungible token collective is the world’s most valuable NFT collection, with an estimated market capitalization of 1.1 million Ether, or $3.4 billion.
Amy Wu the head of FTX Ventures, who participated in the recent funding round, suggests that Yuga Labs is, in fact, looking at the potential of becoming the Disney of the metaverse. “Their North Star is Disney,” Wu says. “They see themselves as holding valuable IP that they want to build, essentially, a media entertainment empire with. … Disney is what it is because of the culture it has created, and that’s what Bored Ape Yacht Club and the Yuga Labs team is trying to do.”
Stablecoins and CBDCs
Australia and New Zealand Banking Group (ANZ) has teamed up with crypto custodian Fireblocks to mint a stablecoin pegged to the Australian dollar. The development marks the first time a major bank has been involved in the creation of a stablecoin, created for the Victor Smorgan Group family office. "An ANZ-issued Australian dollar stablecoin is a first step in enabling our customers to find a safe and secure gateway to the digital economy," said ANZ Banking Services Portfolio Lead Nigel Dobson in a press release. Fireblocks has worked with BNY Mellon (BK), Siam Commercial Bank, Revolut and others.
Regulatory
FTX is expanding into the UK and plans to dominate European markets, but unlike others, it is starting by talking with regulators first. “We are looking to bring spot trading into the UK right now but it’s quite difficult,” Patrick Gruhn the CEO of FTX Europe said. “We want to have a dialogue with the FCA first because the FCA seems to be relatively suspicious regarding crypto.” The FCA's anti-money laundering register has already proven troublesome for many firms with names like Revolute and Copper facing an uncertain future in the days remaining until the FCA end of March deadline under their 'regulatory relief' window.
FTX is seeking to serve Europe from Switzerland with subsidiaries in Dubai and Cyprus.
During the week FTX announced that it has established a regulated presence in Australia, marking the latest stage of the crypto exchange's global expansion push. The announcement coincided with moves from the Australian government to refine its crypto strategy and introduce "badges of approval" for exchanges. The government released a consultation paper entitled "Crypto asset secondary service providers: Licensing and custody requirements." The government has called for feedback and comments on the consultation, which closes on May 27. In Australia FTX holds an Australian Financial Services Licence and will act as the issuer of derivatives including options, futures and contracts for difference (CFDs).
The European Union’s proposed comprehensive crypto regulatory policy proposal, Markets in Crypto Assets (MiCA), is moving forward to the next stage of negotiations without the controversial provision that would have restricted cryptos like bitcoin that are based on proof-of-work.
Recommended - our weekly pick of podcasts, articles and reads.
This week we jump to an interview with Jung Min, co-COO of Global Technology, Media and Telecom (TMT) and co-head of TMT in Asia Pacific Ex-Japan in Goldman Sachs’ Investment Banking Division. Jung explains the evolution of the gaming industry and why this $200bn per annum revenue sector is poised to become the next battleground for big tech. Jung highlights that it’s not just the battleground for big tech, it is fast becoming the backbone for the Metaverse and Web3.0 and as such represents a centrepoint for the convergence of traditional tech with crypto markets.
The interview is available on the GS website or via Apple Podcast.
Events Calendar
6~9 April, Bitcoin 2022, Miami
3~4th May, US Fed FOMC Meeting
4~5 May, TOKEN2049, Singapore
10~12 June, Consensus 2022, Austin
14~15th June, US Fed FOMC Meeting
26~27th July, U.S. Fed FOMC Meeting
20~21st September, U.S. Fed FOMC Meeting
17~20 October, Future Blockchain Summit, Dubai
1~2 November, U.S. Fed FOMC Meeting
1~4 November, Web Summit 2022, Lisbon
13~14th December, U.S. Fed FOMC Meeting
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Disclaimer:
This document is for informational purposes only and is sourced from a variety of publicly available sources. Access is provided free of charge, and like most things, you get what you pay for!
While there may be insights and editorial bias from which financial gain may be available, nothing herein represents advice or solicitation.