CoinShares reports a significant increase in investor bullishness towards digital assets, with a total inflow of $125 million in the past week. In the last fortnight, inflows totaled $334 million, representing nearly 1% of the total assets under management (AuM).
Bitcoin remains the primary choice for investors, with a massive $123 million inflow over the past week. Bitcoin investment products have bounced back to a net inflow year-to-date, overturning a net outflow position of $171 million just two weeks prior. Despite the recent uptick in price, short-Bitcoin investment products experienced a tenth consecutive week of outflows, now representing 59% of AuM.
However, short-Bitcoin remains the second-best-performing asset in terms of year-to-date inflows, with $60 million. As for altcoins, Ethereum leads the pack with inflows totaling $2.7 million, followed closely by Cardano, Polygon, and XRP. Multi-asset and Solana experienced minor outflows of $1.8 million and $0.8 million, respectively. Blockchain equities have also seen a resurgence, with inflows of $6.8 million following a 9-week streak of outflows.
The surge in digital asset investment and blockchain equities indicates growing investor confidence in the crypto industry.
The total AuM reached $37 billion during the week, matching the highest level since early June 2022 and the average AuM for 2022. Trading activity remains robust, with a weekly volume of $2.3 billion, substantially higher than the year-to-date average of $1.5 billion.
The Solana Foundation has publicly objected to the United States Securities and Exchange Commission’s (SEC) recent classification of its native cryptocurrency, Solana (SOL), as a security.
The SEC’s designation of the SOL token as a security is pivotal as it imposes an additional set of regulatory and compliance demands. The classification is hinged on several factors, such as the anticipation of profits originating from third-party efforts, as well as how the tokens are utilized and promoted.
In a statement, the Solana Foundation voiced its disagreement with the SEC’s view, expressing that it welcomes dialogue with policymakers to clarify the legal standing of digital assets. The Foundation also mentioned its active collaboration with legal experts and ongoing communications with the SEC to address their concerns.
Solana’s utility token SOL, which debuted in March 2020, serves multiple functions within its network. SOL holders can stake their tokens to validate transactions through its consensus mechanism, receive rewards, pay transaction fees, and engage in governance.
Notably, the SEC’s security label was attached to the SOL token in two lawsuits filed against crypto exchanges Binance and Coinbase on June 5 and June 6 respectively.
In the past, the Solana Foundation engaged in private sales of tokens to institutional investors and venture firms, reportedly under a simple agreement for future tokens (SAFT), which is a security issuance mechanism for transferring digital tokens from developers to investors. Following such sales, the Foundation filed private offering forms with the SEC.
Moreover, during Solana’s initial coin offering in March 2020, a public sale of SOL tokens took place, with 8 million tokens (1.6% of the initial supply) allocated to the public at $0.22 each, raising $1.76 million for the Solana Foundation.
Bloomberg contributor and legal expert, Matt Levine, offered his view on the controversy in the article titled “When Is a Token Not a Security?”,opining that earlier securities offers of SOL should not necessarily define the token as a security now. He argued that while the SEC might find the current public trading of SOL tokens without adequate disclosure and investor safeguards regrettable, it is not directly Solana’s liability.
This development highlights the ongoing debates and challenges in providing clear regulations for digital assets.
Robinhood Markets Inc., the popular trading platform known for democratizing investing, has released its operating data for May 2023, showing an increase in both equity and options trading but a decline in cryptocurrency trading.
In May, Robinhood’s Net Cumulative Funded Accounts (NCFA) reached 23.1 million, a growth of around 20,000 from the previous month. This figure, however, only represents unique users, as it does not count existing customers who have opened multiple accounts.
Despite the increase in the number of funded accounts, Robinhood reported a drop in Monthly Active Users (MAU), which fell by roughly 900,000 from April to May 2023, bringing the total to 10.6 million.
The trading platform experienced an uptick in Assets Under Custody (AUC), with a 6% increase from April to $81.8 billion by the end of May. Net deposits for the month of May totaled $1.6 billion, an annualized growth rate of 25% compared to April’s AUC. Over the past year, net deposits have reached $16.5 billion, reflecting an annual growth rate of 22% relative to May 2022 AUC.
However, when it comes to trading volumes, Robinhood’s report showed contrasting trends. While equity notional trading volumes rose 27% to $49.4 billion, and options contracts traded increased 29% to 97.5 million, cryptocurrency trading went down. Crypto notional trading volumes decreased significantly by 43% to $2.1 billion, reflecting a relative decline in the enthusiasm for cryptocurrency trading among Robinhood’s user base in May.
The company’s margin balances remained stable at $3.1 billion, showing no change from April 2023. Cash sweep balances, on the other hand, showed a marked increase, growing 16% from the end of April to $11.2 billion by the end of May.
The report provides insights into Robinhood’s performance in a volatile market environment, indicating the shifting preferences of its users. The contrasting trend in equities and options versus cryptocurrency trading may reflect changing investor sentiment in the evolving landscape of financial markets.
Adding to these dynamics that could significantly impact future trading volumes, Robinhood announced the delisting of cryptocurrencies Solana (SOL), Cardano (ADA), and Polygon (MATIC). This decision follows recent charges by the U.S. Securities and Exchange Commission (SEC) against Binance and Coinbase, alleging that these platforms traded unregistered securities. Given these circumstances, a further decline in cryptocurrency trading activity on Robinhood can be expected.
The cryptocurrency market has recorded its eighth consecutive week of outflows, driven by ongoing monetary policy concerns and mounting regulatory pressures. According to a report by CoinShares, outflows from digital asset investment products reached US$88 million last week, cumulating an 8-week total of US$417 million. This ongoing trend is inching towards last year’s record 12-week run of outflows, primarily attributed to the uncertainty surrounding continuous interest rate hikes.
The outflows were largely focused on North America, with one provider accounting for 87% of the total outflows. In Europe, Switzerland bucked the trend with minor inflows of US$9.2 million, while Germany reported outflows of US$9.4 million.
Bitcoin and Ethereum, the two leading cryptocurrencies, were not immune to the trend. Bitcoin saw US$52 million in outflows last week, bringing the total for the past 8 weeks to US$254 million or 1.2% of total assets under management (AuM). Ethereum, despite experiencing its largest single-week outflow of US$36 million since last September’s Merge, has fared comparatively better with total outflows representing 0.6% of AuM.
The altcoin market has shown mixed results. Litecoin, XRP, and Solana experienced minor inflows, while Polygon suffered outflows. Notably, altcoins have, on aggregate, seen inflows year-to-date, contrasting the outflows from Bitcoin and Ethereum.
Regulatory actions are likely contributing to these market movements. The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Binance, one of the world’s largest cryptocurrency exchanges, and its founder CZ on June 5 for alleged violation of U.S. securities rules. The SEC proceeded to take similar actions against Coinbase on June 6.
The SEC has classified several tokens related to Binance, including BNB and BUSD, and other cryptocurrencies like SOL, ADA, and MATIC as securities. The SEC also argues that various other cryptocurrencies traded on Binance.com and Binance.US, and a group of 13 cryptocurrencies traded on Coinbase, were “offered and sold as securities”.
These regulatory moves have rocked the altcoin market. Over the weekend, many altcoins, particularly those identified as securities by the SEC, experienced significant value drops.
As monetary policy issues continue to affect investor sentiment, the added uncertainty from regulatory actions further underscores the volatility and risks inherent in the crypto market. These trends highlight the need for investors to remain vigilant and informed about these evolving challenges.
In an unfolding legal battle against two major cryptocurrency exchanges, Coinbase and Binance, the United States Securities and Exchange Commission (SEC) has declared various tokens as securities. These tokens include SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO in the case against Coinbase. For Binance, the list features SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI.
This declaration by the SEC highlights its ongoing effort to regulate the cryptocurrency market and could have substantial implications for these tokens and their holders. If the SEC succeeds in classifying these tokens as securities, it would subject them to more stringent regulatory rules and obligations.
Barry Silbert, the founder of Digital Currency Group (DCG), commented on the situation via Twitter, noting, “No Proof of Work tokens in any of the lawsuits, I believe (BTC, LTC, XMR, ETC, ZEC, etc.).” Silbert’s tweet refers to the SEC’s decision to not include tokens that use Proof of Work (PoW) consensus mechanism in their lawsuits. This includes Bitcoin (BTC), Litecoin (LTC), Monero (XMR), Ethereum Classic (ETC), and Zcash (ZEC), among others.
The implication of Silbert’s statement suggests that the SEC might be differentiating between PoW tokens and other tokens. This differentiation could lead to different regulatory standards and implications for tokens depending on their underlying consensus mechanism.
This ongoing case and the SEC’s decisions could set a precedent for future regulations and classifications in the crypto market. As such, all eyes within the crypto community are keenly focused on the developments. It is yet to be seen how these decisions will shape the regulatory landscape of digital assets.
The Securities and Exchange Commission (SEC) has leveled a series of accusations against the US operations of cryptocurrency exchange Binance, casting a significant cloud over the future of the platform in the United States.
In a formal complaint, the SEC claimed that Binance US facilitated trading in a range of tokens identified as securities without the requisite permissions. The assets in question include Binance Coin (BNB), Binance USD (BUSD), Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Axie Infinity Shards (AXS), and Coti (COTI).
The SEC’s allegations also extend to investment schemes run by the platform. Binance’s BNB Vault and Simple Earn programs, as well as a staking investment plan, are accused of having operated outside of US regulatory oversight.
The accusations seem to point to a fundamental charge of intentional evasion of US supervision by Binance, a claim that could carry significant implications for the cryptocurrency exchange’s operations within the country.
However, it is important to clarify the nature of these charges. The allegations brought forth by the SEC, as well as those by the Commodity Futures Trading Commission (CFTC), against Binance are civil, not criminal in nature. This marks a distinction from the money laundering charges faced by other exchanges such as BitMEX in previous cases.
The fallout from the accusations is yet to be fully realized, but this could mark a pivotal moment in the ongoing tug-of-war between cryptocurrency exchanges and regulatory bodies. As Binance contends with these accusations, the crypto industry will no doubt be watching closely, aware that the outcome could have far-reaching implications for the future of digital asset trading in the United States.
Digital asset manager CoinShares says last week’s crypto market recovery was accompanied by significant institutional investment inflows for several large digital assets.
According to the latest Digital Asset Fund Flows Weekly report, the largest crypto by market cap, Bitcoin (BTC), enjoyed last week’s largest share of institutional investments.
“Bitcoin continues to lead the inflows with US$71m last week, the largest since early December with this 3-week run of inflows totaling US$108m. Volumes in Bitcoin investment products remained low last week at US$1.8bn versus US$3.4bn the previous week.”
Leading smart contract platform Ethereum (ETH) suffered its ninth consecutive week of outflows, losing $8.5 million in institutional investments last week.
“Investment products flows for Ethereum suggest investors remain bearish with outflows of US$8.5m, having entered the 9th week run of outflows totaling US$280m…”
Meanwhile, Ethereum challengers Solana (SOL), Polkadot (DOT), Terra (LUNA) and Cardano (ADA) all saw inflows totaling $2.4 million, $2.2 million, $1.4 million and $1.1 million, respectively. This was the first week of significant institutional investor inflows for LUNA.
Source: CoinShares
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Morgan Creek Capital Management’s Mark Yusko is naming four crypto assets that he believes could withstand a market downturn relatively well.
According to a Business Insider report, Yusko says that the native tokens of smart contract-enabled blockchains Solana (SOL), Avalanche (AVAX), Cosmos (ATOM) and Polkadot (DOT) are among the crypto assets capable of surviving a bear market.
In the case of Solana, the Morgan Creek founder says that the seventh-largest blockchain by market cap is a “great protocol.”
“There’s probably still some potential volatility in the price ahead. But long term, I think it’s a great protocol.”
According to Yusko, cryptocurrencies will be in a bear market for the next 12 months or so before the next Bitcoin halving event kicks off a bull cycle.
“What you’re seeing is crypto is definitely in a bear cycle. It’s going to struggle for the next 12-ish months then we’ll go back to the next bull cycle triggered by the next halving event.”
The last Bitcoin (BTC) halving event occurred in May of 2020. The next one is expected to take place during the first six months of 2024.
Yusko also says that Bitcoin is not correlated to stocks though it might appear to be so on shorter time frames. For instance, Bitcoin is down 7.77% year-to-date compared to the tech-heavy Nasdaq which has fallen 9.89% year-to-date in the wake of the Federal Reserve’s intentions to hike rates.
“You can’t calculate correlation over the short-term. Just the math doesn’t work. And so yes, it is true that in times of stress, ‘all correlations go to one.’
Zoom out, the correlation of Bitcoin to equities is 0.15 for long periods of time. Some weeks, some months, it goes higher, but over the long term, it’s still 0.15 and to bonds, it’s 0.”
Correlation can take a value of between -1 and 1. The higher the value, the stronger the correlation, and the lower the value, the weaker the correlation.
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New data reveals that Ethereum challenger Polkadot (DOT) consumes the least amount of electricity out of any leading blockchain.
According to new research conducted by the Crypto Carbon Ratings Institute (CCRI), the interoperable blockchain platform uses less power than other popular crypto assets such as Bitcoin (BTC), Ethereum (ETH) and Solana (SOL).
The institute found that DOT consumes just 6.6 times the electricity the average US household uses in a year, making it the least power-draining digital asset among the top chains.
For comparison, ETH uses 1.6 million times what the average US household uses in electricity while that number jumps up to 8.6 million for BTC, according to the CCRI.
“An average US household consumes about 10,600 kWh per year and therefore, the least electricity consuming network Polkadot consumes about 6.6 times the electricity and the most electricity consuming network Solana about 200 times the electricity (U.S. Energy Information Administration, 2021)…
Bitcoin consumes much more electricity than any Proof of Stake system due to its Proof of Work consensus mechanism, resulting in the deployment of energy-intensive hardware.”
Source: Crypto Carbon Ratings Institute
The data shows leading smart contract platform ETH is right behind BTC in terms of power usage, followed by other layer-1 protocols SOL, Cardano (ADA), Algorand (ALGO), Avalanche (AVAX) and Tezos (XTZ).
“Algorand consumes up to the factor of 9 compared to other cryptocurrencies such as Cardano and Polkadot. Tezos is in between these two groups. It consumes up to factor 5 of the low-energy blockchains, but only about 50% of Algorand’s consumption.”
Polkadot is exchanging hands at $21.45 at time of writing, an 23% increase from its seven-day high of $17.42.
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This week in coins. Illustration by Mitchell Preffer for Decrypt.
After a veryrocky start to the year, crypto price watchers finally saw the start of a promising recoverylast week. This week, prices continued to rise. In fact, today’s growth alone has been particularly noteworthy: The global crypto market cap climbed 10% in just 24 hours, to hit $1.9 trillion.
The two market leaders posted noteworthy gains this week. Friday, Bitcoinrecrossed the $40k threshold, and it sustained that growth well into Saturday. The world’s most popular cryptocurrency has grown 8.8% over the last week and currently trades at $41,460.
But Bitcoin’s growth has been overshadowed by Ethereum, which grew 16% this week and trades at $3,015.
In fact, all top 30 cryptocurrencies (excluding stablecoins) are up this week, except for Fantom, which lost 0.6% and trades at $2.16.
The biggest successes of the week are: Solana, up 17% to $115; Polkadot, up 15% to $21.60; Avalanche, up 10% to $78.36; Litecoin, up 10% to $121.95; Near Protocol, up 18% to $13.29; and Decentraland, up a whopping 26% to $2.99.
News of the week
On Monday, the International Monetary Fund’s financial counselor, Tobias Adrian, warned of creeping ‘cryptoization,’ his term for cryptocurrency crossing over into the financial mainstream. The senior official said “capital flow management measures will need to be fine-tuned.”
Adrian highlighted some of the risks we’re facing: “Crypto is being used to take money out of countries that are regarded as unstable [by some external investors].”
Adrian also noted that Bitcoin is now showing a strong correlation with traditional financial markets: “The correlation between crypto and equity markets has been trending up strongly. Crypto is now very closely tied to what is happening in equities. We can’t just dismiss it.”
On the same day, JP Morgan senta note to investorswarning that Bitcoin is still too volatile for mass institutional adoption. Meanwhile, Ethereum, which has enjoyed second place in the market cap table thanks largely to the NFT and DeFi capabilities of its smart contract-enabled blockchain, is facing pressure from competitors like Solana and Terra.
On Tuesday, Indian finance minister Nirmala Sitharaman announced a30% tax on crypto incomewith no exemptions or deductions. Investors filing their tax returns won’t be able to show losses due to price crashes or theft in order to offset the tax on their profits.
At the same time, Sitharaman said that the Reserve Bank of India (RBI) will introduce a digital rupee in the next financial year. The minister confirmed that this will be a blockchain-basedCBDC, but gave no further details.
The British government updatedthe ruleson DeFi and staking on Wednesday. Her Majesty’s Revenue and Customs (HMRC) confessed that “it is not possible to set out all the circumstances in which a lender/liquidity provider earns a return from their activities and the nature of that return,” and offered crypto investors four “guiding principles” to help them fill out their tax returns. (Across the pond, a U.S. lawsuit may have implications for how the Internal Revenue Servicetaxes staking rewards.)
Finally, Meta (formerly Facebook) had a tough week.Shares plummeted 21%in pre-market trading on Thursday. CEO Mark Zuckerberg blamed a fall in projected first-quarter earnings on “increasing competition,” particularly from TikTok, but the billions Meta has thus far spent in developing its metaverse pivot could also be a major factor in the expected shortfall.
Meta was also hit by allegations of verbal abuse and sexual harassment during atech demofor the company’s virtual reality metaverse. Add to that the fact that the company’s “borderless global currency” Diem is nowdead in the water: Meta officially announced it was selling off all of the project’s assets and intellectual property to Californiancrypto-friendly bank Silvergate.
Still, in spite of, or perhaps because of Meta’s bad news, Metaverse-related tokensare surging right now.
