August 2024 Digital Asset Market Commentary – CKC.Fund

Key Takeaways:

?? Tokenized U.S. Treasuries and stablecoin AUM hit new ATHs.

?? Interest rates highest in 23 years. Many expect rate cuts in September.

?? SEC continues to battle Coinbase, Kraken, Ripple, and others in crypto industry.

?? Combined U.S. Spot BTC/ETH ETFs exceed $60 billion in AUM.

?? Crypto AI agents engage in crypto transaction, 6G wireless expected by 2030.

?? X and Telegram face legal challenges; crypto industry responds.

? Prediction markets see surge in activity; AI tokens recover.

Market Performance:

The Federal Reserve has maintained the federal funds rate at 5.25 – 5.5%, the highest it's been in 23 years. They are scheduled to meet in September with many expecting the first cut since 2020 — ostensibly in an effort to spur economic growth.

The crypto market cap has been largely sideways this month, with Bitcoin (BTC), Ether (ETH), and stablecoins accounting for more than 75% of the entire $2 trillion market. As conditions turn bullish, many investors tend to move into mid- and low-cap altcoins in an effort to boost returns.?

On a yearly basis, the crypto market cap has doubled since January 2024.

Macroeconomics:

Experiencing rapid growth in 2024, the U.S. tokenized treasuries market recently surpassed the $2 billion mark — signaling a growing shift to tokenized treasuries over their traditional counterparts.?

The USD-pegged stablecoin market has also seen growth throughout the year, with the asset-backed stablecoin market hitting a new all-time high AUM of over $168 billion. A growing stablecoin AUM often indicates that investors are trading out of digital assets — or moving their USD into stablecoins in order to enter positions.

It’s also worth noting that these stablecoins are increasingly being used in everyday transactions — particularly in countries with weak and/or highly inflationary currencies.

BTC/ETH News:

Launched last month, U.S. Ethereum (ETH) Spot ETFs ended August with nearly $7 billion in net assets — representing 2.3% of the total ETH supply. Despite this, there is an ETH ETF net outflow since launch (of nearly $0.5 billion) due to over $2.5 billion leaving the Grayscale Ethereum Trust ETF (ETHE).

The Bitcoin ETFs, launched earlier this year, had nearly $54 billion in net assets — corresponding to 4.6% of the total BTC market cap. The total net inflow since launch sits at $17.6 billion (as of 8/30/2024), with the discrepancy accounted for by Grayscale’s Bitcoin Trust (GBTC). Like Grayscale’s ETHE, it has seen an outflow of nearly $20 billion since the BTC ETFs became available (largely due to its higher fee structure).?

Hong Kong-based Bitcoin ETFs collectively saw their AUM hit $2 billion this month as well. Their in-kind digital asset model may allow them to differentiate themselves from the digital asset spot ETFs offered in the U.S (which use a cash-creation model). For Bitcoin and other crypto ETFs, in-kind redemption may help preserve liquidity and reduce capital gains. However, regulators like the SEC have tended to favor cash redemption for Bitcoin ETFs, requiring conversion of the crypto to cash during redemption.

Memecoins, AI + Other Technology Trends in Crypto:

From August 6 – 27, AI tokens recovered nearly 80% — growing from an $18.2 – $32 billion market cap. This is likely due to a recovering BTC price and renewed investor confidence in the AI sector.?

Prediction market activity has seen a notable uptick in 2024, particular in August with nearly $475 million being wagered on one platform — Polymarket — alone. These prediction markets allow knowledgeable investors to monetize insights into outcomes of elections, sports, the weather, and a plethora of other outcomes.?

Innovation/Development News:

Crypto exchange Coinbase announced that they oversaw their first crypto transaction between AI agents. While AI agents can’t own bank accounts, they can have crypto wallets. This opens up the possibility for these AI agents to automatically book hotel reservations, flights, and other tasks.

A new silicon chip advancement could see 6G wireless internet service arrive this decade. 6G would double 5G network speeds and reduce latency by approximately 90%. This would enable high-definition VR/AR streaming, the control of robotic swarms, and other technologies and applications previously not possible.

International News:

France arrested Telegram CEO Pavel Durov and he faces charges related to conspiracy, fraud, money laundering, and more. Many have speculated that this may be politically motivated and some see it as a warning to those who support free speech.

This echoes the legal edicts that X has been issued in Brazil. It is likely that these enforcement actions could incentivize the creation of more privacy-focused messaging and social media apps that leverage blockchain technology.

Regulatory & Legal News:

The current U.S. SEC and administration’s critical approach to the crypto ecosystem has resulted in regulatory actions against Ripple, Kraken, Coinbase, and others. The SEC even sent a Wells notice to NFT marketplace OpenSea.

Responding accordingly, many in the U.S. crypto community have rallied around pro-crypto political candidates, and various leading crypto companies and thought leaders have publicly donated to pro-crypto candidates and PACs. Some speculate that this could swing multiple tight election races.

Stay in Touch

Navigating the ever-changing landscape of digital assets can be a challenge. That's why we’ve created this newsletter to help bring clarity to the complexity. In addition to a monthly summary of the most important crypto news, we layer in insightful commentary from insiders and experts who understand the cryptocurrency market.

If you’re interested in enhancing your understanding of this rapidly evolving space, we kindly suggest you follow us on LinkedIn. Stay one step ahead in the world of digital assets with us. You are also welcome to reach out to us at [email protected] if you would like to know more. The CKC.Fund Team [email protected]

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