Biden's Re-election Bets Spike ??, Ether ETF Approval Imminent ? & Worldcoin's Investor Lock-Up Extension ??

Hey There!

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Welcome to Clutch's weekly Pocket News. ?? This week, President Biden's COVID-19 diagnosis has sent Polymarket buzzing with bets on his potential dropout from the re-election race??. Meanwhile, the highly anticipated Ether ETFs are just a step away from approval in the U.S.?. State Street is making waves with its plans for stablecoins and tokenized deposits, while Worldcoin's WLD token surged 45% after extending its investor lock-up period??. Lastly, Bitcoin faces a critical point, hovering below $64K amidst a broad U.S. equity selloff, leaving market watchers on edge??.

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In this week’s deep dive, James explores how blockchain technology is set to revolutionize structured products, cutting costs, enhancing accessibility, and improving finance's overall efficiency????????.

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Let’s get it. ??

CRYPTO NEWS

Biden Dropout Odds Spike on Polymarket ??

After President Joe Biden tested positive for COVID-19, bets on his withdrawal from the re-election race surged to 66% on Polymarket. This diagnosis came shortly after Biden remarked that a “medical condition” might prompt his withdrawal. The market has over $16.4 million riding on this bet. Despite his diagnosis, Biden continues his duties from Delaware. The odds of Biden winning the election dropped to 13%, with former President Donald Trump leading at 69%. Meanwhile, the betting market still favors Biden as the Democratic nominee with a 49% chance.

Ether ETF Approval Imminent as Final Forms Submitted ?

The race to launch the first Ether ETFs in the U.S. is heating up, with all major applicants, including BlackRock, Fidelity, and Grayscale, submitting their final forms to the SEC. Sources indicate that approvals could be granted as early as next Tuesday. Filing details reveal a range of competitive management fees, with Grayscale at a higher 2.5% for its main product, while others like BlackRock and Fidelity are set at 0.25%. This forthcoming approval marks a significant milestone for Ethereum, mirroring the excitement seen with Bitcoin ETFs earlier this year.

State Street Eyes Stablecoins and Tokenized Deposits ??

Boston-based financial giant State Street is exploring the creation of stablecoins and tokenized deposits to enhance blockchain settlements. This move aligns with their broader digital asset strategy, which includes collaborations with Galaxy Digital and investments in blockchain firms like Fnality International. The initiative aims to leverage blockchain for increased efficiency and reduced costs in financial transactions. This development follows similar efforts by industry heavyweights like BlackRock and JPMorgan, highlighting the growing integration of traditional finance with blockchain technology.

Worldcoin Surges 45% After Extending Investor Token Lock-Up ??

Worldcoin’s WLD token jumped 45% following the announcement that the lock-up period for investors and team members would be extended from three to five years. This delay affects around 80% of WLD’s allocated tokens, reducing the daily unlock rate by 40%. The extension aims to allow the protocol to mature further. Notably, token grants for verified World ID holders remain unchanged. With over 6 million orb-verified World IDs, the Worldcoin network continues to grow, reinforcing its ambitious goal of reaching 1 billion users in the near future.

Bitcoin Drops Below $64K Amid U.S. Equity Selloff ??

Bitcoin?dipped below $64,000, reversing early gains as a broad-market selloff in U.S. equities weighed on the crypto market. BTC fell 2% within an hour, trading at $64,000, down 0.5% over 24 hours. Altcoins like Solana, Cardano, and Chainlink dropped 2%-4%, pulling the CoinDesk 20 Index down 1.2%. Key U.S. indices such as the Nasdaq and S&P 500 also declined, driven by a rotation from tech megacaps like Nvidia. LMAX Group strategist Joel Kruger noted the potential for a deeper stock market correction but highlighted Bitcoin's appeal as a flight-to-safety asset and its long-term innovation potential, suggesting buying opportunities during dips.

James's technical debrief: Reinventing Structured Products with Blockchain Technology ??????

The integration of blockchain technology into the world of?structured products?marks a significant evolution in finance, promising to reduce costs, enhance composability, and improve accessibility. Christine Cai of Cicada Partners and Alexander Szul of Rome Blockchain Labs argue that blockchain can revolutionize how structured products are issued, managed, and distributed, creating innovative financial solutions that were previously unattainable.

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A summary of the Case for Blockchain in Structured Products:

Current Market Landscape and Potential:

• Structured products, traditionally managed by institutional investors, combine various assets and derivatives to tailor specific risk-return profiles. The global market for structured notes is estimated to exceed $2 trillion. Blockchain technology stands to expand this market significantly by streamlining the end-to-end process, from origination to investor outreach.

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Cost Reduction and Process Efficiency:

• Traditional structured products involve numerous intermediaries like brokers, custodians, and clearinghouses, leading to significant operational costs (1% to 5% of investment value annually). Accenture estimates that blockchain can cut infrastructure costs for major investment banks by an average of 30%, saving $8-$12 billion annually.
• Enhanced transparency and audit trails provided by blockchain also help reduce regulatory capital requirements, simplifying compliance and audit processes.

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Enhanced Composability:

• Blockchain’s smart contracts are ideal for managing complex financial products, allowing for quick and innovative financial engineering. This modularity enables investors to craft tailored products by combining yield-generating DeFi protocols, tokenized assets, and risk-managing derivatives like options or futures.
• The modular nature of blockchain facilitates creating personalized financial instruments, broadening the scope of customizable investment solutions.

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Improving Accessibility:

• Historically, structured products have been accessible only to institutions. Blockchain's modularity and fractional ownership lower the barriers, allowing broader investor access and reducing friction on both the supply and demand sides.
• Fractionalization of assets on blockchain enables smaller investors to participate in markets previously reserved for large institutions, democratizing access to sophisticated financial products.

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Growth of the DeFi Structured Products Market:

• DeFi structured products provide advanced risk management mechanisms like principal protection and downside barriers. Platforms such as Pendle ($6 billion TVL) and Ethena ($3.6 billion TVL) exemplify the growing demand for new derivatives.
• The progressive maturity of market infrastructure and the expansion of product offerings are driving this trend forward, with DeFi structured products increasingly capturing investor interest.

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Innovations and Supporting Technologies:

• Tokenization Standards:?Innovations like ERC-1155, ERC-404, and ERC-1400 are addressing challenges in bond identification, product tranching, and regulatory controls for structured product issuance.
• DeFi Prime Brokerage:?Platforms like Arkis introduce sophisticated margin engines for asset-specific valuations, cross-margining, and cross-chain liquidation.
• Institutional-Grade Risk Management:?Firms like Talos (Cloudwall) and Gauntlet develop risk management systems essential for facilitating institutional capital entry.
• Decentralized Option Vaults (DOVs):?DOVs provide automated yield generation, risk management, and integration with other DeFi protocols.
• Oracles:?Chainlink's Cross-Chain Interoperability Protocol (CCIP) enhances data reliability and cross-chain functionality, easing integration between traditional and crypto markets.
• Crypto Options:?Platforms like AEVO and Hegic offer automated on-chain options, well-suited for algorithmic structured products.
• Benchmark and Index Development:?New benchmarks and indices like the Coindesk 20 Index (CD20) and CESR Composite Eth Staking Benchmark offer reliable references for market views and risk management.
• Tokenization:?Tokenization is foundational for on-chain structured products, with TVL reaching $130-$170 billion in 2024, including stablecoins, according to RWA.xyz.

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Addressing Risk-Return Profiles:

• Structured products create specific risk-return profiles, capturing substantial upside while mitigating risks. Principal-protected notes, for instance, offer a solution to the inherent barbell-shaped risk-return profile of many crypto products by integrating principal protection to manage depegging risks.

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Blockchain technology is poised to revolutionize the structured products market by enhancing efficiency, transparency, and accessibility. The potential savings and operational efficiencies are compelling, providing a powerful incentive for institutions to adopt blockchain for structured product management.

The modularity and flexibility of blockchain enable the creation of highly customizable financial solutions, meeting the diverse needs of investors. As DeFi structured products continue to grow and mature, they demonstrate the robust demand for innovative financial instruments capable of addressing sophisticated risk management requirements.

The integration of traditional and crypto assets through tokenization further narrows the gap between traditional finance and the evolving crypto ecosystem. By leveraging blockchain, the financial industry can unlock new efficiencies, democratize access to complex financial products, and foster an inclusive, innovative financial future. The path forward involves developing compelling use cases that showcase the transformative potential of blockchain in structured products, paving the way for broader adoption and integration.

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