Building Blocks #45
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Birds Eye View (vs Last 7 Days)
?? Overall Crypto Market Cap: $3.18 Trillion (-1.8%)
?? BTC Dominance: 57.6% (-0.5 PPT)
?? Price Snapshot:
?? Bitcoin: $96022 (-2.3%)
?? Ethereum: $2674 (-5.6%)
? XRP: $2.44 (-0.3%)
?? Solana: $193 (-4.2%)
16 US states lead in strategic Bitcoin reserve creation
A remarkable shift is occurring across America as approximately one-third of US states are exploring an unprecedented financial territory: establishing dedicated Bitcoin reserves.
While the federal government under President Donald Trump continues to develop its national digital asset strategy, individual states are taking proactive steps. Drawing inspiration from international success stories like El Salvador and bolstered by President Trump's unprecedented support for the cryptocurrency sector, these states are forging ahead with their own innovative initiatives.
Sixteen US states are actively evaluating Bitcoin as a component of their investment portfolios, with legislative frameworks for allocating public funds to digital assets currently under consideration. States such as Arizona and Utah have already achieved significant progress, with their respective bills clearing committee approval and awaiting chamber votes—transforming the concept of state-level Bitcoin reserves from a distant possibility into an imminent reality.
The momentum for governmental Bitcoin adoption has gained significant traction in the US following Trump's presidential inauguration. During his inaugural address to the sector on Feb. 4, White House cryptocurrency advisor David Sacks emphasized that exploring potential Bitcoin reserves would be "one of the first things we are going to look at" as part of the administration's internal working group.
Early in his presidency, Donald Trump issued an executive order establishing a specialized task force to shape US digital asset policies, generating optimism for widespread cryptocurrency adoption. This group has been given a six-month deadline to deliver a comprehensive roadmap, potentially encompassing sector regulations, digital asset investment guidelines, and groundbreaking proposals including a national Bitcoin reserve.
While some market observers expressed disappointment that Trump didn't immediately initiate a strategic Bitcoin reserve, state-level initiatives are gaining substantial momentum.
Should these legislative proposals successfully navigate their respective approval processes, we could witness state-level Bitcoin acquisitions in the near future—potentially well before any federal government implementation.
Several state proposals, including Arizona's legislation, would empower state treasurers to invest up to 10% of their public funds in Bitcoin, potentially triggering a cascade effect among other states. Similar legislative initiatives have emerged in Oklahoma, New Hampshire, and Pennsylvania, where lawmakers have proposed allocating up to ten percent of public funds for Bitcoin acquisition over a designated timeframe.
Echoing the sentiment of many Bitcoin enthusiasts, Eric Trump took to X on Feb. 5, stating, “Feels like a great time to enter Bitcoin!”?
Proponents of a Strategic Bitcoin Reserve (SBR) contend that such an investment could function as an effective safeguard against inflation and monetary devaluation. Unlike traditional fiat currencies that central banks can print without limitation, Bitcoin's capped supply offers potential protection for national wealth against the typical risks of currency depreciation.
Following an initial upward momentum, Bitcoin and other digital currencies experienced a reversal during the early phase of the Trump administration. The initial wave of optimism gradually subsided as it became apparent that considerable effort would be required before substantial advancement could be achieved.
Will these proposed initiatives reach their conclusion, or will they remain mere symbolic gestures amid the cryptocurrency enthusiasm generated by Trump's return to presidential office?
"The market now requires concrete government action, likely spearheaded by the Treasury, through actual cryptocurrency purchases," explained Eugene Epstein, who heads Trading and Structured Products North America at Moneycorp, during an nterview.
Despite skepticism from various market analysts, the swift emergence of Bitcoin and digital asset reserve legislation at the state level indicates a fundamental shift in governmental perception of cryptocurrency—potentially viewing it as a long-term value store rather than merely a speculative asset.
Undoubtedly, US implementation of an SBR could serve as a significant catalyst for Bitcoin's expansion. However, political challenges persist, with considerable uncertainty regarding Trump's ability to implement a proposal that would likely necessitate legislative changes.
Through judicial seizures and enforcement actions, the US has already become the largest sovereign Bitcoin holder. According to BitcoinTreasuries.NET statistics, the US possesses over 207,000 BTC—approximately 1% of the total 21 million supply. Initial efforts will likely concentrate on managing this existing holdings, though the administration has yet to provide specific guidelines.
As market observers maintain close attention, many experts suggest that the Bitcoin Act's implementation could have more significant long-term implications for Bitcoin than ETF launches. January research from CoinShares emphasized that such legislation could enhance Bitcoin's legitimacy as an asset class and facilitate institutional adoption through endorsement from the world's largest government, potentially delivering an even more substantial boost to cryptocurrency than ETFs provided.
Eric Weiss, a Core Scientific board member, shared his bullish perspective on X.
"Trump advocates holding Bitcoin, with his entire administration showing strong support. As states and nations build their reserves, the direction is clear—yet people continue to hesitate. The simple strategy? Buy Bitcoin and hold."
Litecoin ETF has 90% chance to get SEC approval in 2025: Analysts
Bloomberg's ETF analysts have projected a 90% likelihood that the Securities and Exchange Commission (SEC) will greenlight a spot Litecoin ETF by the end of 2024.
According to Bloomberg experts James Seyffart and Eric Balchunas, Litecoin's approval prospects surpass those of other proposed ETFs, including spot XRP (65%), Solana (70%), and Dogecoin (75%).
Litecoin, developed in 2011 as a more efficient alternative to Bitcoin, utilizes a similar proof-of-work consensus mechanism as its predecessor.
In a post on X, the analysts indicated that Litecoin's regulatory approval path appears most promising, given that both S-1 and 19b-4 forms have been submitted and acknowledged, coupled with the SEC's likely classification of it as a commodity.
The push for additional crypto ETFs comes amid robust interest in spot Bitcoin and Ether ETFs, which have accumulated $40.7 billion and $3.18 billion in net inflows since their respective launches in January and July 2024, according to Farside Investors data.
Although Seyffart anticipates more modest demand for a Litecoin ETF, he suggests that fund companies could find value in the product even with assets as low as $50 million.
"From an issuer's perspective, they don't need to achieve exceptional inflow numbers to make it a viable investment," Seyffart explained during an interview.
According to Seyffart's timeline, the SEC's final decision deadline for Litecoin, Solana, XRP, and Dogecoin ETFs falls between October 2 and October 18, with the possibility of a Litecoin ETF debut occurring earlier.
The analysts also noted ETF applications for Hedera and Polkadot submitted by Canary Capital and 21Shares, though they haven't assigned approval probabilities to these proposals yet.
Seyffart anticipates more crypto ETF proposals, suggesting U.S.-based ETF issuers will adopt what he calls a "spaghetti cannon approach."
"We'll likely see issuers launching numerous products to see which ones gain traction," Seyffart explained.
Balchunas highlighted that prior to Donald Trump's victory in the US presidential election on Nov. 5, 2024, the approval odds for these crypto ETFs — with Litecoin being the sole exception — were hovering below 5%.
The regulatory landscape remains complex for Solana and XRP, with Seyffart suggesting that XRP ETF approval would be contingent on the complete resolution of the SEC's ongoing lawsuit against Ripple.
While Ripple achieved a significant partial victory in August 2023, when courts determined that XRP sales on secondary markets don't constitute securities, the SEC subsequently challenged this ruling, maintaining that Ripple violated securities laws in its retail investor sales.
These regulatory actions were initiated under SEC Chairman Gary Gensler's leadership. Now, with acting chair Mark Uyeda at the helm, Ripple expresses optimism that the new administration might withdraw the enforcement case altogether.
Regarding Solana, Seyffart emphasized last month that its security status must be definitively settled before the SEC can evaluate it within a "commodities ETF wrapper" framework.
Goldman Sachs boosts Ethereum ETF holdings by 2,000%, Bitcoin ETFs to $1.5B
Investment giant Goldman Sachs expanded its spot Ether exchange-traded fund (ETF) position by 2,000% during Q4 2024, while simultaneously enlarging its Bitcoin ETF portfolio to exceed $1.5 billion.
The firm expanded its Ether ETF holdings from $22 million to $476 million, distributed roughly equally between BlackRock's iShares Ethereum Trust (ETHA) and the Fidelity Ethereum Fund (FETH), plus $6.3 million in the Grayscale Ethereum Trust ETF (ETHE), according to the firm's February 11 Form 13F submission to the Securities and Exchange Commission.
The bank also increased its Bitcoin ETF investments by 114% to $1.52 billion. It acquired approximately $1.28 billion in shares of the iShares Bitcoin Trust (IBIT) — representing a 177% rise from Q3 — alongside $288 million in shares of the Fidelity Wise Origin Bitcoin Fund (FBTC).
The filing — mandatory for investment managers with securities exceeding $100 million each quarter — reveals Goldman additionally holds $3.6 million in the Grayscale Bitcoin Trust (GBTC).
The heightened exposure incorporated rising market values for BTC and ETH, which gained 41% and 26.3% respectively from the start to end of the fourth quarter, according to CoinGecko data.
Goldman apparently liquidated its positions in Bitcoin ETFs from Bitwise and WisdomTree, as well as collaborative products from Invesco and Galaxy, plus ARK and 21Shares.
These expanded positions build upon Goldman Sachs' initial venture into the spot crypto ETF market in Q2 2024, when it reported acquiring $418 million in Bitcoin ETFs.
Goldman's latest acquisition of Bitcoin and Ether ETFs demonstrates the increasing institutional crypto adoption on Wall Street, driven by an improving regulatory landscape.
The investment firm is also exploring the development of its own crypto platform enabling partners to trade financial instruments on blockchain infrastructure, Bloomberg reported in November.
Goldman has, nonetheless, maintained skepticism toward Bitcoin and the broader sector since 2020, stating that crypto isn't an asset class and "not a suitable investment" for their clients.
A comparable perspective was expressed by Goldman Private Wealth Management chief investment officer Sharmin Mossavar-Rahmani last April, coinciding with Goldman's initial Bitcoin ETF purchases.
"We do not consider it an investment asset class," Mossavar-Rahmani stated then, drawing parallels between recent crypto enthusiasm and the 1600s tulip mania. "We're not believers in crypto."
Swedish fintech giant Klarna will ‘embrace crypto,’ CEO says
Swedish fintech powerhouse Klarna Bank AB, which is reportedly eyeing a US initial public offering in 2024, has announced plans to "venture into crypto," as revealed in a Feb. 8 social media update from CEO Sebastian Siemiatkowski.
While sharing his own thoughts, Siemiatkowski sought community feedback, drawing responses from prominent industry leaders. The company currently handles an impressive annual trading volume of approximately $100 billion.
Circle's Chief Executive Jamie Allaire suggested implementing their USD Coin stablecoin, while Immutable's Robbie Ferguson highlighted the potential for gamers to leverage buy-now-pay-later options for $150 billion worth of in-game purchases.
Siemiatkowski openly admitted that Klarna would be trailing behind its major rivals, PayPal and Revolut, both of which already provide extensive cryptocurrency services.
For instance, PayPal's own stablecoin, PayPal USD, has achieved a market capitalization of $583 million since its August 2023 debut, according to CoinGecko statistics. Meanwhile, Revolut provides access to 175 cryptocurrency tokens, with some trading fees as low as 0%.
This development coincides with Klarna's preparations for a US initial public offering, as reported by the Financial Times on Feb. 8.
Interestingly, Siemiatkowski's current crypto enthusiasm marks a significant shift from his late 2022 stance, when he characterized Bitcoin as a "decentralized Ponzi scheme."
He had also previously expressed concerns about cryptocurrency transaction fees sometimes exceeding the actual transaction value.
However, Siemiatkowski's journey with cryptocurrency understanding has been quite transparent. In June 2021, he admitted to having limited knowledge about blockchain technology and crypto mining operations.
His candid curiosity was evident when he inquired, "Given that Bitcoin has a maximum cap of 21 million coins, would trading become impossible once all coins are mined?"
In a surprising turn of events, on Feb. 10, Siemiatkowski released an AI-generated musical creation titled "Crypto Boy," a three-minute composition encompassing various crypto elements from Bitcoin and Binance to Coinbase, along with concepts like staking, non-fungible tokens, and mining.
The Klarna story began in 2005 when Siemiatkowski, alongside Victor Jacobsson and Niklas Adalberth, whom he met during their time working at Burger King, established the company.
1/3 of Central Banks take a step back on launching CBDCs over regulatory concerns
Approximately one-third of central banks have postponed their central bank digital currency (CBDC) initiatives due to regulatory uncertainties and shifting economic circumstances.
A survey involving 34 central banks released on Feb. 11 by the research organization Official Monetary and Financial Institutions Forum (OMFIF) and security technology company Giesecke+Devrient Currency Technology revealed that while institutions committed to launching CBDCs remain on track, roughly 31% have pushed back their implementation timelines.
Primary factors behind these delays include "issues surrounding regulatory and governance frameworks" and unexpected "economic priorities taking precedence over CBDC development," according to the report.
"The establishment of legislation depends partly on political support, rather than just the central bank's technical capabilities or policy decisions," the report noted.
US President Donald Trump issued an executive order on Jan. 23 that formally banned the creation, distribution, circulation and utilization of a CBDC within the nation.
Though the cryptocurrency community largely welcomed the prohibition, industry leaders voiced worries about its implications for other nations pursuing CBDC development.
Additional reasons cited by surveyed central banks for postponing CBDC launches included economic difficulties and, in one instance, technical obstacles.
"One participant indicated that rising inflation and debt challenges led the central bank to delay its launch schedule," the report mentioned.
Several banks indicated they would scale back their CBDC research to "prioritize other payment-related matters."
OMFIF indicated that technical hurdles no longer present a major challenge for most central banks; previous surveys had identified technical aspects like offline functionality, privacy features and payment system compatibility as CBDC implementation barriers.
One institution cited technical concerns regarding user privacy as cause for delay, with the report highlighting privacy as an "increasingly disputed topic given the extensive personal information being gathered, retained and examined."
The survey revealed that the proportion of central banks indicating stronger inclination toward issuing CBDCs decreased to 18%, compared to 38% in 2022.
This was accompanied by a rise in banks showing less interest in CBDC issuance, increasing by 15%, up from 0% in 2022. Nevertheless, the majority of surveyed central banks still anticipate introducing CBDCs.
The Human Rights Foundation, which launched a CBDC monitoring system in November 2023, indicates that CBDC advantages include the potential for enhanced payment efficiency and broader financial access for underserved populations.
However, disadvantages are identified as the currency's possible privacy implications and increased opportunities for governmental misconduct, alongside other risks.
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