BitGo: Crypto Water Cooler — Jan 17
GM. It’s Wednesday, January 17.
New on the BitGo blog: Everything you need to know about BTC ETFs
Newsmakers
The Battle for ETF Approval Won, a New Battle for Market Share Begins
The battle for SEC approval may be over but, for the eleven newly minted Bitcoin ETFs, the battle for market share and staying power has just begun. It will be won or lost based on distribution, brand, and fees, Spencer Bogart, a former ETF analyst and current partner at Blockchain Capital, told CoinDesk.
The battle lines were drawn Thursday, the first day of trading, when the eleven new ETFs combined to generate $4.6B in trading volume. However, just over a quarter of that was new money coming into Bitcoin. According to early data from Bloomberg Intelligence, Grayscale Bitcoin Trust, which has an expense ratio of 1.5 percent, saw $579MM in outflows. Meanwhile, Bitwise, which went to market with the lowest expense ratio at .2 percent, was the day-one winner with $238M of new capital flowing into the fund. It was followed by the big brand names: Fidelity saw $227MM of inflows and, BlackRock, $112MM. Competition has already led to a race to the bottom in fees for many traditional ETFs, and something similar could play out here. Many of the funds are waiving fees for early investors in a bid to attract capital.
Right now, much of the activity appears to be coming from institutional investors as the ETFs are not yet widely distributed on brokerage platforms — a process that could take weeks. But financial advisors, family offices, and RIAs (registered investment advisors) have always been a large part of the target market for these funds. Bitwise CEO Matt Hougan (whose firm launched the Bitwise Bitcoin ETF) says that financial advisors are increasingly carving out allocations of one to five percent for Bitcoin. Matt Walsh of Castle Island Investors sees tech- and growth-oriented funds as likely early buyers.
Increased activity from retail investors is likely on the way but further out. Brokerage platforms Schwab, Robinhood, and E*trade are offering the ETFs while Vanguard and others have opted not to make them available to clients. Wells Fargo Advisors will make them available upon request as will UBS Group. Merrill Edge is still evaluating the products.
While the new ETFs have been met with considerable fanfare, not everyone within the Bitcoin community is enthusiastic. Many don’t like the idea of large amounts of BTC being held by a handful of major financial institutions as this increases centralization and creates the risk of a single point of failure. There are also concerns that they could use their holdings to play a bigger role in the governance of Bitcoin. Whether likely or not, the potential for conflict in these areas illustrates the tension that exists between Bitcoin purists and Wall Street.
Read more →Reuters
Turkey Accelerates Crypto Regulations to Exit FATF Grey List
Years of double-digit inflation (around 65 percent as of last month) and an 80-plus percent drop in the value of the lira versus the USD over the past five years have propelled Turkey to fourth place in global crypto transaction volume behind the U.S., India, and the UK. According to a recent Chainalysis report, the country logged transactions worth $170B in 2023. This is despite the country being greylisted since 2021 by the Financial Action Task Force (FATF), which sets international standards for preventing money laundering and terrorist financing.
To exit the grey list, Turkey must address the forty FATF recommendations — including crypto registration and licensing rules. As of July 2023, all but this recommendation had been marked as partially compliant, moving the need for crypto regulations to the forefront.
Now, according to Turkey’s Treasury and Finance Minister Mehmet Şimşek, the country is in the final stages of their technical studies before implementing regulations that will require licensing for exchanges wishing to operate there. Initial objectives are to reduce trading risks in line with international standards and create a safe environment to develop blockchain technology and a crypto ecosystem. Taxation issues will be addressed at a later date. Licensees will be overseen by the Capital Markets Board (CMB).
Officials believe that removal from the FATF list could help to integrate Turkey into the global financial system and solidify its international standing. They aim to have their legislative proposals for crypto ready as early as the end of January — just in time for the next FATF evaluation, which is scheduled for February.
Read more →Middle East Policy Council
Report: DApps Shine in 2023 But Killer App Remains Elusive
No matter what you call them — decentralized apps, dApps, dapps, or Web3 apps — 2023 was a good year for this emerging technology, finds the Dapp Industry Report 2023 from Web3 distribution platform DappRadar. But it wasn’t the breakthrough year of killer apps that proponents hoped for. To achieve that, as well as continued growth, increased user friendliness appears to be critical.
The report notes a 124 percent YoY increase in the number of unique active wallets (UAWs) engaging with these apps with an end-of-year number of 4.2M daily UAWs. Games saw over a quarter of all activity with a daily average of 1.1M UAWs at the end of the year. NFT collection trading drove a surge in new UAWs with Blur capturing 56 percent of trading volume and OpenSea having the highest trader count at 280,000 average traders monthly.
New app launches dropped; DappRadar says it approved 2,985 new apps this year — down significantly from the 7,127 the platform approved in 2022. In 2023, the most popular was Alien Worlds where participants build a sci-fi metaverse together in exchange for NFTs and the ability to compete for Trillium coins.
However, mass adoption remains elusive. Social messaging app Friend.tech seemed poised for such success in August last year but has since lost 90 percent of users. Avalanche based Stars Arena was thought to have similar potential but was plagued by a hack and staff defections. One in-depth academic study found 81 percent of participants are interested in blockchain technology, but using it still takes too much effort. Another academic study found that the typical user is still less satisfied with blockchain-based apps than alternatives. These results suggest the need for a “gentler learning curve.”
Read more →DappRadar.com
News In Brief
Recommended by LinkedIn
Regulation and Security
Business of Crypto
DeFi and Web3
Midweek Market Pulse
Total Market Cap: $1.70T — 7 day change as of Tuesday 1/16/24 12 PM EST: -0.6%
The global crypto market cap dropped slightly to $1.7T as Bitcoin (BTC, -6.2%) slid following ETF approval and Ethereum (ETH, +9.7%) surged. While the Bitcoin ETFs are widely seen as a long-term positive development, in the short term, some traders are treating the long awaited SEC approval as a “sell the news” opportunity for profit taking. It appears that the speculation and intrigue preceding the debut of Bitcoin ETFs has now shifted to the eventual approval of spot Ethereum ETF applications from the likes of BlackRock, ARK Invest, Van Eck, and Fidelity. The SEC has a May 23 deadline to rule on Van Eck’s ETF application.
While Bloomberg senior ETF analyst Eric Balchunas assigns a 70% probability to these ETFs being approved by that deadline, not everyone sees spot Ethereum ETFs as a done deal. In a client note, investment bank TD Cowen said it doesn’t expect approval and that the SEC will likely wait to see what transpires with the Bitcoin ETFs before approving new ETFs for other digital assets, writing “The wait might not be as long as 26 months, but it likely would be after the election.”
Meanwhile, layer-1 Sui (SUI +59.4%) had a strong week based on major increases in usage and TVL. On Monday, Sui hit a new all-time high of $1.43 and TVL has swelled above $300MM, putting it in the top 15 cryptocurrencies by TVL. Celestia (TIA, +28.9%), discussed more in-depth here last week, also hit an all-time high as it surpassed the $20 mark. The price of Celestia has now increased tenfold since its October airdrop.
The Last Word
THE LAST WORD: dapps, dApps, Web3 Apps
Noun
Applications built using smart contracts
/ While all dApps are Web3 apps, not all Web3 apps are dApps. For a Web3 app to be a dApp, it must use a decentralized community-based governance model.
About BitGo
BitGo provides the most secure and scalable solutions for the digital asset economy, offering regulated custody, borrowing and lending, and core infrastructure to investors and builders alike.
Founded in 2013 — the early days of crypto — BitGo pioneered the multi-signature wallet and later built TSS to improve upon other companies’ MPC offerings. Between multi-sig and TSS, BitGo offers the safest technology on the market and safeguards over 600 tokens across a wide variety of blockchains.
Over the years, BitGo has expanded from offering wallets into providing a full-suite solution that lets clients hold assets safely and then put them to work.
BitGo launched BitGo Trust Company in 2018, providing fully regulated, qualified cold storage to complement BitGo Inc’s original hot wallet solution. In 2020, BitGo launched BitGo Prime, which allows its clients to trade, borrow, and lend. Moreover, BitGo also provides access to DeFi, staking, NFT wallets, and beyond, and serves as the world’s sole custodian for WBTC, or wrapped Bitcoin.
Today, BitGo is the leader in digital asset security, custody, and liquidity, providing the operational backbone for more than 1500 institutional clients in over 50 countries — a list that includes many regulated entities and the world’s top cryptocurrency exchanges and platforms. BitGo also processes approximately 20% of all global Bitcoin transactions by value.
For more information, please visit www.bitgo.com.
©2024 BitGo Inc. (collectively with its affiliates and subsidiaries, “BitGo”). All rights reserved. BitGo Trust Company, Inc., BitGo Inc., and BitGo Prime LLC are separately operated, wholly-owned subsidiaries of BitGo Holdings, Inc., a Delaware corporation headquartered in Palo Alto, CA. No legal, tax, investment, or other advice is provided by any BitGo entity. Please consult your legal/tax/investment professional for questions about your specific circumstances. Digital asset holdings involve a high degree of risk, and can fluctuate greatly on any given day. Accordingly, your digital asset holdings may be subject to large swings in value and may even become worthless. The information provided herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. BitGo is not directing this information to any person in any jurisdiction where the publication or availability of the information is prohibited, by reason of that person’s citizenship, residence or otherwise.