DigitalX Funds Weekly Wrap (7-14 July 2023)
DigitalX Limited (ASX:DCC)
Transparent investment management at the intersection of technology and finance #Web3 #DigitalAssets
Weekly Price Action?
*All figures below are in USD unless otherwise specified.
Market commentary
A landmark moment in crypto wrapped up the week; with the long awaited result of the US Securities and Exchange Commission lawsuit against Ripple over the selling of unregistered securities through its XRP token finally coming to a conclusion. The event marked the first win for a crypto organisation in a case brought by the SEC, with the courts concluding that “Ripple’s Programmatic Sales of XRP did not constitute the offer and sale of investment contracts”. Since the successful ruling, XRP rallied over 80%, marking a significant moment for the digital asset sector but also a significant setback for the SEC. It was reported back in May 2023, that Ripple’s defence costs in the case amounted to US $200 million, thereby leading to the inference that the expenses incurred by the SEC totaled to something similar. We’re left now to examine the implications this case may have on other altcoins within the sector, specifically Polygon, Solana and Cardano; while BlackRock and Fidelity stand waiting and ready for successful Bitcoin ETF filings with the SEC.
CEO comment
This week the Gap between Bitcoin and the S&P 500 stayed relatively stable at 48% (46% last week). Throughout the second half of the year all eyes will be on the SEC’s review of the recent spot Bitcoin ETFs that will open the floodgates to institutional investors like never before.
At DigitalX we have been doing a lot of background work on ETH being the Web3 risk free rate proxy - though as more institutional grade tokens emerge we don’t rule out a basket proxy. Regardless, central banks will be getting a run for their money and this week's reminder that 92% of global central banks are now looking at CBDC’s makes us confident of what our recent eAUD test with Canvas will lead to….
TOO BIG FOR THE SHIFT LIST - Ripple v SEC judgement overnight - our very own trader Alex Nagorskii had a strong conviction in this case, and our Fund held firm on our XRP position - this is a huge boost for the crypto industry.
In terms of the shift list:
Our diversified crypto fund continues to use a robust investment process to give wholesale investors exposure to the shift from Web2 to Web3 financial infrastructure and rails, or the internet of value as it is becoming known. Some of the key themes that we have been exploring this year include Web3 identity (soul-bound tokens and layer 1 identity validation) and decentralised data. While also continuing to closely observe ZKrollups, infrastructure plays such as wallets, and a new and emerging theme in Layer 0. And of course real world asset tokenisation and the recognition of Bitcoin as exchangeable money (store of value, medium of exchange, access to credit) has thus far been the theme throughout 2023.
Lisa Wade (she/her), CEO DigitalX
Week in review
The Shift List
Market Updates
Macro/ Regulatory Environment
In the spotlight?
Ripple Labs Inc did not violate federal securities law by selling its XRP token on public exchanges, a U.S. judge ruled on Thursday, a landmark legal victory for the cryptocurrency industry that sent the value of XRP soaring. XRP was up 75% by late afternoon on Thursday, according to Refinitiv Eikon data.
The ruling by U.S. District Judge Analisa Torres was the first win for a cryptocurrency company in a case brought by the U.S. Securities and Exchange Commission -- though it did also give the SEC a partial victory.
"Having considered the economic reality and totality of circumstances surrounding the Institutional Sales, the Court concludes that Ripple’s Institutional Sales of XRP constituted the unregistered offer and sale of investment contracts in violation of Section 5 of the Securities Act," the ruling states.
The ruling went on to say that having "considered the economic reality and totality of circumstances, the Court concludes that Ripple’s Programmatic Sales of XRP did not constitute the offer and sale of investment contracts."
Ripple has been locking horns with the SEC since as far back as 2020.
?itcoin (BTC)
Vanguard Group, a prominent global asset manager overseeing $8.1 trillion in assets under management, has recently made substantial investments in two renowned Bitcoin mining companies, Marathon Digital Holdings and Riot Blockchain. According to filings submitted to the U.S. Securities and Exchange Commission (SEC), Vanguard’s increased involvement indicates a growing interest in the cryptocurrency market. This article delves into Vanguard’s investment in Bitcoin mining firms, the significance of these investments, and the asset manager’s prudent approach to the broader crypto market. Vanguard’s filings with the SEC disclose that the company owns 17.5 million shares in Marathon Digital Holdings and 17.9 million shares in Riot Blockchain.
The largest cryptocurrency by market capitalization could appreciate in price by nearly $100,000 by the end of 2024, according to financial services giant Standard Chartered Bank. In a Monday research report, the UK-based global banking giant said that it increased its bitcoin price target from $100,000 — which it forecasted in April — to $120,000. The firm said the price of bitcoin could increase to $50,000 by the end of 2023. The report points to an increase in miner profitability as one potential tailwind that could trigger an appreciation in the price of the cryptocurrency.
Galaxy CEO Mike Novogratz thinks that the flood of recent proposals for spot Bitcoin ETFs, if approved, will be a harbinger of broader crypto adoption. "BlackRock, Invesco, the group of ETF providers is a real signal that adoption is coming," Novogratz said Wednesday on Bloomberg TV.
"Think about it. Larry Fink travels the world talking to the biggest pools of capital," he added. "It makes it really easy when he’s out there saying bitcoin is an alternative. And if you’re nervous about who’s your custodian, the ETF is a really easy first step. And so I just think if it happens, it’s the seal of approval from the SEC and the U.S. government that this is an asset."
Ethereum (ETH)
Aave Companies, a key contributor to the Aave DeFi lending protocol, has proposed launching the decentralized stablecoin GHO as an ERC-20 token on the Ethereum mainnet. The proposal seeks to introduce GHO through Facilitators, allowing users of Aave version 3 (V3) to mint GHO against their collateral, according to the Aave Improvement Proposal.
Stablecoin borrowing on Aave would become more competitive and generate additional revenue for the DAO if the proposal is approved implemented, Aave Companies said. “If approved, the introduction of GHO would make stablecoin borrowing on the Aave Protocol more competitive and generate additional revenue for the Aave DAO by providing to the DAO treasury 100% of the interest payments made on GHO borrows,” it wrote.
The Starknet team deployed the Quantum Leap - Starknet V12.0 upgrade on the mainnet, resulting in increasing the network’s throughput. The upgrade made its debut on the Ethereum mainnet on Wednesday, following over a week’s trial on the Goerli testnet. This period saw the network edging closer to triple-digit transactions per second (TPS). The team, however, said it’s aiming to achieve hundreds of transactions per second by the end of the third quarter. The team noted that the Quantum Leap upgrade demonstrated consistent delivery of 37 TPS throughout the testing phase, with occasional surges up to 90 TPS. This presented a marked upswing from the network’s previous speed levels of 10 TPS.
About DigitalX
DigitalX Ltd (ASX:DCC) is a leading ASX-Listed Bitcoin and digital asset funds management business. The Company has a 9 year track record mining Bitcoin, blockchain and smart contract development. DigitalX Asset Management is the investment manager of digital asset investment products that provide qualified investors with highly secure and streamlined access to digital asset exposure. To learn more contact the team at?[email protected]?or visit our website?https://digitalx.fund/.