BitGo: Crypto Water Cooler — Jan 10

GM. It’s Wednesday, January 10.

BitGo’s Industry Trends 2024 : Insights and Narratives From Market Leaders

Newsmakers

Bitcoin’s Wild Ride: SEC’s Spot ETF Approval, False Start, and Market Impact

It’s finally here! After months, even years, of waiting, a fusillade of back and forth between the applicants and the SEC, no shortage of speculation, and the mother of all false starts yesterday, the spot Bitcoin ETFs have finally been approved for trading in the U.S., marking the dawn of a new era for the first digital asset.

On Thursday afternoon, the SEC approved 11 spot Bitcoin ETFs for trading , including funds from Ark, Bitwise, BlackRock, Fidelity, Franklin, Grayscale, Hashdex, Invesco, Valkyrie, VanEck, WisdomTree. The ETFs are expected to begin trading on Thursday morning.

The journey, which kicked into overdrive in June when BlackRock filed for a spot Bitcoin ETF, inspired a wave of applications from other firms — and has had no shortage of twists and turns. More recently, a flurry of amended filings took place (with unusually rapid SEC responses ) and, for fifteen brief minutes yesterday, people celebrated seemingly good news. The SEC’s official account on X had tweeted a message saying that the agency had approved the spot Bitcoin ETF — with this fake news quickly being reported by numerous news outlets. The sentiment was quickly followed by confusion, as SEC Chair Gary Gensler shared that the X account had been compromised and the information shared had been inaccurate.

During the brief moments of celebration when it was believed that the spot ETF had been approved, Bitcoin went from a price of approximately $46,600 to $47,680, marking a two-year high for this cryptocurrency. The price dropped to almost $45,500 and has been fluctuating around that point ever since, including on Wednesday morning .

Responses to the retracted tweet included suspicions by some ETF-watchers that the information was correct but released prematurely (either accidentally or on purpose to gauge reactions, depending on who was making the comments). Whatever the ultimate cause, the faux pas didn’t stop the ultimate approval that would come later on Wednesday in a seminal moment for the original digital asset and the cryptocurrency industry as a whole.

The availability of these Bitcoin ETFs is a new chapter for Bitcoin as everyday individual investors can now gain direct exposure to Bitcoin using their brokerage or retirement accounts for the first time. The ease and convenience of buying a Bitcoin ETF will make gaining exposure to Bitcoin as simple as buying a share of a stock or ETF, giving a whole new cohort of investors access to Bitcoin for the first time. Bitcoin ETFs will also make it easier for institutional investors, hedge funds, family offices, and others to gain exposure to Bitcoin.

Ultimately, this is a major victory for Bitcoin and digital assets, but remember that one Bitcoin is still one Bitcoin, just like it was before ETF approval, and just like it will be afterward. This is just one step in a bigger journey, too, because we’ll keep building as Bitcoin continues to cement its place as the world’s hardiest currency, accessible to all.

Financial Stability Measures After MiCA Passage in the EU

On April 23, 2023, the EU passed the Markets in Crypto Act (MiCA), the most comprehensive crypto regulation to date. Since then, the EU has worked on procedures to implement the regulation in the real world and test its viability.

This includes the January 3, 2024 announcement about the next stress test on EU banks (conducted every two years) by the European Banking Authority (EBA ). This independent agency is charged with safeguarding the “integrity and robustness” of the banking sector to support the EU’s financial stability, and these stress tests are designed to help the EBA gain a real-world understanding of the impact of adverse market developments. This round will include analysis of the activities of non-bank financial institutions (NBFIs) and how they may impact traditional lenders. (NBFIs — which include hedge funds, private equity funds, crypto entities, and more — currently house about half of the world’s financial assets: $219T.)

As EBA Chair José Manuel Campa notes, it’s crucial for the EBA to trace the entire “underlying chain in NBFIs” to understand the potential impact that could occur between banks and NBFIs and the latter’s “not-homogenous” disclosure of data.

In the upcoming assessment, the EBA will collaborate with the European Systemic Risk Board (ESRB ) — established in 2010 — to oversee the EU financial system and mitigate or prevent systemic risks and the Financial Stability Board , an international body that monitors the global financial system and makes recommendations. Together, these bodies will investigate the impact of NBFIs on the traditional financial system.

This is not the first time the EBA has taken actions to mitigate systemic stressors that could be caused by cryptocurrencies. In November, they released draft rules for stress testing stablecoin issuers focusing on liquidity and capital requirements, including reserve assets. The EBA also provided AML/CFT guidelines . Additionally, in October, they proposed the vetting of individuals with more than a ten percent stake in a crypto company for prior sanctions or convictions. The EBA also recommended that crypto companies stay vigilant with customers who use self-hosted wallets or privacy coins to detect money laundering. In September, they gave tax collectors the authority within member states to monitor crypto transactions to ensure appropriate tax assessments . Summaries of the upcoming stress tests will be published on the EBA website when completed.

Read more →EBA

Visa and the Web3 Loyalty World: Tipping Point of Enhancing Customer Relationships?

Gaining loyal customers can be the “holy grail” of marketing campaigns, and the Visa Web3 Loyalty Engagement Solution, created in partnership with Web3 engagement and loyalty platform SmartMedia Technologies, may play a key role in furthering programs that truly engage consumers. As brands leverage this technology, customers can earn points through “gamified giveaways and immersive treasure hunts” designed by the brands. The points can be used towards “virtual, digital, or real-world experiences in sectors such as travel, sports, and more.”

Loyalty programs are nothing new, of course. B2C businesses often develop them to reward their customers’ ongoing engagement and to gather behavioral data to personalize marketing efforts. However, consumers seem to be increasingly dissatisfied with the structure of Web2 brand loyalty programs. One survey of 60,000+ consumers globally showed that customers want to be rewarded for truly interacting with brands in an authentic manner rather than simply because they’ve made a purchase.

Web3 loyalty programs allow customers to earn, own, trade, or instantly redeem rewards for exclusive access to the brand and special experiences while helping companies build brand loyalty . Businesses exploring or already engaging with Web3 loyalty programs include the Gap and their gamified NFTs on Tezos; Clinique and their Meta Optimist NFT; Starbucks and their NFT-enabled rewards program, Odyssey, which is accepting waitlist entries; and FamilyMart and their points-to-crypto program. Another is Williamsburg Pizza in New York in collaboration with Hang and Partners for their Pizza My Heart program. With Boba Guys Passport , also created in conjunction with Hang, the bubble tea company allows consumers to accumulate points through transactions that, in turn, can open and upgrade Mystery Boxes. These boxes can contain free drinks, gift cards, discounts, and opportunities for free vacations. To add to the engagement, members can choose to open Mystery Boxes immediately or keep them locked while saving up for higher rewards. In general, the fashion industry is engaging with Web3 loyalty programs, including brands like Lacoste, LVMH, and Dior. Additional brands exploring Web3 loyalty programs include Adidas, E.l.f. Cosmetics, Ticketmaster, and Nike .

These programs are all designed to satisfy consumers’ wants and needs while building brand loyalty in dynamic ways — with the payment giant Visa’s technology further raising the awareness of these kinds of programs — and can serve as yet another entry point into the Web3 world.

Read more →Crypto.news

News In Brief

Regulation and Security

• Many $10,000+ Crypto Transactions Must Now Be Reported to the IRS — CoinTelegraph
• Crypto Regulations Tightened in 80% of Major Jurisdictions in 2023 — Crypto.news
• Nigeria’s Central Bank Releases Guidelines for Banks Opening Crypto Accounts — Bloomberg ($)

Business of Crypto

• Key Elements to Watch as Vitalik Buterin Lays Out Ethereum’s Roadmap for 2024 — CoinTelegraph
• Third Largest Public U.S. Bitcoin Mining Firm Plans to Establish Own Trading Desk — Crypto.news
• Dormant Bitcoin at Low Numbers Amid Presumed Profit Taking — Crypto.news

DeFi and Web3

• U.S. CFTC Subcommittee Publishes Benefits & Risks Report: Decentralized Finance — CFTC.gov
• South Korean Firm Kakao Tokenizes Gold, First Gold Token Offered Off Ethereum — The Block
• Singapore’s Foresight X to Fuel Web3 Innovation with Third $10M Accelerator — CoinTelegraph

Midweek Market Pulse

Total Market Cap: $1.71T — 7 day change as of Tuesday 1/9/24 Noon EST: -1.7%

As this market chart from Tuesday at noon EST shows, Bitcoin (BTC, +4.0%) started 2024 by picking up where it left off in 2023, continuing to chug higher as both the crypto and TradFi worlds await the SEC’s long-anticipated decision on the spot Bitcoin ETF applications — soon needing to shrug off the mother of all false starts in the process. In what can only be described as an ignominious moment for an organization that notes concerns about market manipulation surrounding Bitcoin, the SEC’s Twitter account announced that the Bitcoin ETFs were approved only for SEC Chair Gary Gensler to tweet that the SEC account had been compromised (see lead story for more!). Bitcoin initially spiked to $47,900 after the tweet before receding back to the $45,000 level.

As the industry continues to wait, CoinDesk describes the spot Bitcoin ETF proceedings as “almost unprecedented engagement between the SEC and prospective issuers, with filings following SEC responses and then updated filings within a short span of 24 hours.” Meanwhile, former SEC Chairman Jay Clayton told CNBC , “I think approval is inevitable, and I think there is nothing left to decide.” However, time will tell when an actual approval will drop.

In other Bitcoin news, CoinShares reports that institutional investors poured $2.25B into Bitcoin-related institutional investment products in 2023. According to the firm’s 2023 Digital Asset Fund Flows Annual Report, Solana (SOL, -6.0%) accrued $167M of inflows, surpassing Ethereum’s $78M. Notably, U.S.-based institutional investors increased their investment to $792M, significantly more than the $334M they invested in the sector in 2022.

While all eyes are on Bitcoin and the SEC, the global crypto market cap is roughly flat at $1.71T as Ethereum (ETH, -3.6% as of Tuesday) surged overnight into Wednesday morning, but key altcoins trended lower. Interestingly, while Ethereum initially traded lower over the past week, it staged a strong rally after the SEC Twitter kerfuffle, gaining 3% in the hour after the now-deleted Tweet. Economist Alex Krüger noted that this could suggest limited near-term upside for Bitcoin following ETF approval as the narrative shifts towards approval for Ethereum ETFs . Excitement about a potential airdrop from staking protocol Eigenlayer may be another catalyst for Ethereum.

Celestia (TIA) was one asset that notably bucked this trend. Celestia only launched the beta version of its mainnet in October but has already accrued a market cap of $2B and claimed its place within the top 50 digital assets by market cap. Market participants have flocked to Celestia due to the 15–17% yields for staking TIA on native platforms. Users are also eagerly anticipating airdrops from projects being built on the Celestia blockchain. Additionally, Celestia’s appeal as a modular blockchain seems to be propelling it higher as this narrative gains traction with investors.

The Last Word

Non-Bank Financial Institutions (NBFIs)

Noun

: entities that provide services similar to banks but do not hold a banking license

/ The terms of “NBFI” and “NBFC” for “non-bank financial company” are used interchangeably.

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.