Bitcoin ETFs: What are they and how do they work?
Justin Arzadon
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Bitcoin and the rest of the crypto market spiked briefly over the past seven days following the announcement of a deal being reached over the US debt ceiling, but finished the week essentially flat.
As at 4 June 2023, bitcoin was trading at US$27,154. Ethereum outperformed bitcoin over the week, up by 2.82% vs bitcoin’s -0.3% loss. Bitcoin’s market capitalisation is at US$526.5 billion, with total crypto market cap above US$1.15 trillion. Bitcoin’s market dominance was at 45.9%.
| Price | High | Low | Change from previous week | |
| BTC (in US$) | $27,154 | $28,432 | $26,574 | -0.3% |
| ETH (in US$) | $1,900 | $1,926 | $1,846 | 2.82% |
Source: CoinMarketCap. As at 4 June 2023. Past performance is not indicative of future performance. Performance is shown in US dollars and does not take into account any USD/AUD currency movements.
Source: Glassnode. Past performance is not indicative of future performance.
Crypto news we’re watching
Tokenisation of real-world assets gains traction
Swiss firm Taurus, which offers custody, tokenisation and trading of digital assets, has linked with Polygon to allow financial institutions and corporates to issue tokenised assets on the Ethereum layer 2 network. In February, Taurus raised US$65 million in funding, led by Credit Suisse and Deutsche Bank. Tokenisation is the conversion of ownership rights in an asset into a digital token.
In an email, Taurus said: “Most Tier 1 financial institutions are entering a space and building capabilities to manage tokenised securities. They all want a blockchain-agnostic and token-agnostic infrastructure.”1
Crypto returns to Hong Kong
On 1 June, Hong Kong started to allow retail trading in cryptocurrencies once again. However, a new licensing regime also took effect, which includes measures to protect retail investors. New rules, which are more stringent on crypto companies than in the past, require all applications for a trading platform or exchange licence to be filed using the Virtual Asset Service Provider (VASP) app. Failure to do so may result in fines and jail terms.
Crypto is still banned in China, so operators will have to perform checks to ensure traders from China are not accepted. Keith Choi, interim head of intermediaries at the Securities and Futures Commission (SFC), commented: “Operators have the responsibility to comply with the laws and regulations in the jurisdictions in which it provides services.”2 With clear regulations in place, Hong Kong appears to be further ahead than many other jurisdictions, including the US.
CRYP company spotlight
Applied Digital (Nasdaq: APLD)
Applied Digital, currently the sixth largest holding in the Betashares Crypto Innovators ETF (CRYP), designs, develops and operates next-generation data centres across North America to provide digital infrastructure solutions to the rapidly-growing high performance computing (HPC) industry.
In mid-May, the company announced the launch of its Artificial Intelligence (AI) Cloud services that will provide high-performance computing power for AI applications, including large language model training, graphics rendering, and more.3
On 24 May, the company announced that it will be working with the Nasdaq listed firm, Supermicro, a leading provider of application-optimised total IT solutions, to deliver Applied Digital’s AI Cloud Service.4
On-chain metrics
Bitcoin (BTC): Realised Price [USD]
Realised Price is the Realised Cap divided by the current supply. Realised Cap values each coin based on the price when it last moved, as opposed to its current value.
If the market price sits below the Realised Price, this metric can indicate that the bitcoin market is under a period of stress.
According to data from Glassnode, as at 3 June 2023, Realised Price sits at US$20,202, well below the current price of US$27,247.
Source: Glassnode. Past performance is not indicative of future performance.
This metric shows the percentage of circulating supply in profit, i.e. the percentage of existing coins whose price at the time they last moved was lower than the current price.
Based on data from Glassnode, as at 3 June, overall, investors in BTC are in a relatively healthy position with over 67% of supply sitting in a profitable position.
Source: Glassnode. Past performance is not indicative of future performance.
Altcoin news
Over the week to 4 June, one of the largest moves to the upside was from Lido DAO (LDO), with an increase of over 16%. The Lido DAO is a Decentralised Autonomous Organisation that decides on the key parameters of liquid staking protocols through the voting power of governance (LDO) tokens.
According to the website Milkroad, some of the pros of using the Lido DAO are the ease of use of the platform, the liquidity of stETH, enabling it to be used while you stake ETH, and the fact that decentralisation is maximised with governance tokens available.5
Investing in crypto assets or companies servicing crypto-asset markets should be considered very high risk. Exposure to crypto assets involves substantially higher risk when compared to traditional investments due to their speculative nature and the very high volatility of crypto-asset markets.
Investing in crypto assets or crypto-focused companies is not suitable for all investors and should only be considered by investors who (i) fully understand their features and risks or after consulting a professional financial adviser, and (ii) who have a very high tolerance for risk and the capacity to absorb a rapid loss of some or all of their investment. Any investment in crypto assets or crypto- focused companies should only be considered as a very small component of an investor’s overall portfolio.
Investing in crypto assets or crypto-focused companies is not suitable for all investors and should only be considered by investors who (i) fully understand their features and risks or after consulting a professional financial adviser, and (ii) who have a very high tolerance for risk and the capacity to absorb a rapid loss of some or all of their investment. Any investment in crypto assets or crypto- focused companies should only be considered as a very small component of an investor’s overall portfolio.
References:
1. https://www.coindesk.com/business/2023/06/02/credit-suisse-deutsche-bank-backed-taurus-deploys-on-polygon-blockchain/
2. https://www.reuters.com/technology/hong-kong-regulator-issue-crypto-licences-with-retail-investor-guardrails-2023-05-24/3. https://ir.applieddigital.com/news-events/press-releases/detail/55/applied-digital-launches-cloud-service-to-empower4.https://ir.applieddigital.com/news-events/press-releases/detail/58/applied-digital-teams-with-supermicro-to-deliver-ai-cloud5. https://milkroad.com/reviews/lido
Past performance is not indicative of future performance.
Off the Chain is published every 2nd Tuesday. It provides the latest news on bitcoin and the rest of the crypto market, along with analysis and insights into the world of crypto.
It provides general information only and is not a recommendation to invest in any crypto asset, crypto-focused company or investment product.
1 comment on this
How does the collaboration between Swiss firm Taurus and Polygon enable financial institutions and corporates to issue tokenised assets on the Ethereum layer 2 network? Additionally, what is the significance of Taurus raising $65 million in funding, with support from Credit Suisse and Deutsche Bank, and how does tokenisation play a role in this context?
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