Crypto Commentary March: Banks Scramble to offer Bitcoin Products

Bitcoin started off the month at the $46,000 mark after a sell off in late February. An all-time high of $61,314 was reached on March 14th as a plethora of positive news and investment continues to pour into digital assets. 

 

NFT Boom

 

In our end of year note, the GSR team outlined how extensive growth of the NFT market was expected in 2021, however, what has occurred has far surpassed expectations.

 

The NFT boom is what has brought the crypto world to an entirely new and extensive global audience. This month Dapper Labs, the team behind NBA top shot raised $305 million, earning a valuation of $2.6 billion. The raise was backed by NBA and NFL figures Michael Jordan, Kevin Durant and Stefon Diggs. 

 

In other NFT news, a token of Jack Dorsey’s first ever tweet was sold for $2.9 million. Nashville-based band the Kings of Leon also announced that their latest album will be released as an NFT. Fans will be able to unlock album art, limited-edition records, and unique concert experiences. 

 

However, the pinnacle event that epitomizes the hype of the NFT craze was Beebles artwork auction. Beeple sold his creation ‘Everdays: the first 5,000 days’ at Christie’s for $69.3 million, making him the third most-expensive living artist after Jeff Koons and David Hockney. The sale was covered in the homepage of the Wall Street Journal. The world of art, collectables, sport and music are colliding with crypto, as the promise of the ‘tokenization of everything’ takes its first steps. 

 

A new era for fiscal policy

 

Meanwhile, the U.S. government’s $1.9 trillion COVID-19 stimulus package has started to come into effect. In early March the bill was passed by a vote of 220 to 211, singing off one of the largest federal aid packages since the Great Depression of the 1930s. The package will provide another round of direct payments for American citizens, as well as unemployment support, small business support, relief for schools and states, and extensive vaccination aid. With a potential further stimulus on the way, inflation fears are rightly among the biggest worries for asset and portfolio managers. The Biden administration has been adamant that this is not a one of payment, but the first of many. The preparations for the next $3 trillion of infrastructure support are already underway. As Modern monetary theory becomes more centre stage for monetarily sovereign countries like the US, assets with finite supply, such as Bitcoin, should benefit.

 

The cat is out of the bag for institutions

 

In a symbolic move, one of the world’s oldest banks BNY Mellon invested in Fireblocks, a trusted partner of GSR.

 

JP Morgan, one of the world’s largest banks, published a report warning that traditional financial companies are at risk of falling behind in digital finance. The bank created a debt instrument allowing their customers to get exposure to crypto focused companies. The exposure basket is long MicroStrategy (20%) Square (18%), Riot Blockchain (15%) chipmaker NVIDIA (15%), Paypal (10%) and others. In total the basket encompases 11 companies that can be seen in the SEC filing submitted on March 9th.

 

Goldman Sachs is exploring how it can allow their clients to gain exposure to bitcoin. Bank President and Chief Operating Officer John Waldron said “client demand is rising,”. The bank recently restarted its crypto trading desk and has started dealing bitcoin futures. CNBC reported that Goldman is “close” to offering bitcoin and other digital asset services to its wealth management clients, reporting suggests products could be live in Q2.

 

On March 11th, Morgan Stanley sent a memo to clients outlining its plans to launch access to three funds that enable ownership of bitcoin. Two of the funds are from Galaxy Digital while the third is overseen by FS Investments and NYDIG. In a separate note, Morgan Stanley analysts outlined the case for crypto as an emerging asset class: 

 

‘With cryptocurrency, we think that threshold is being reached. A firming regulatory framework, deepening liquidity, availability of products and growing investor interest—especially among institutional investors—have coalesced.’

 

Joining the abundant list, Fidelity Digital Assets is preparing to launch its own bitcoin exchange-traded fund. The firm filed an S-1 form with SEC, who last week acknowledged a bitcoin ETF 19-b4 proposal from VanEck. This is VanEck’s second attempt, Valkyrie and WisdomTree have also filed for bitcoin ETFs in recent months, with Grayscale also potentially joining the race soon, if their recent job postings are to be considered. Due to the institutional demand and success of similar Canadian products an ETF in the US could be possible in 2021. Fidelity is arguably the most reputable name to enter the race, however an S-1 form is only a signal of intent to start off the record conversations, a 19-b4 form is what would start the clock for approval and official on record conversations. 

 

Payments adoption

 

Visa has announced that transactions can be settled using the stablecoin USDC. This is a substantial win for USDC creators Circle, who built the stablecoin on top of the Ethereum network. USDC recently broke the $10 billion market cap mark, cementing its place at second-largest stablecoin behind Tether. A geographical trend has emerged where USDC is most commonly used in North American timezones, in comparison to Tether which continues to be more popular in the Asia-Pacific region.

 

In other payments news, CEO of Tesla Elon Musk tweeted “you can now buy a Tesla with bitcoin” on March 24th. “Tesla is using only internal & open source software & operates Bitcoin nodes directly. Bitcoin paid to Tesla will be retained as Bitcoin, not converted to fiat currency,” Elon added. 

 

PayPal has started to allow U.S. customers to spend their cryptocurrency at millions of online merchants across the globe. Customers can spend ETH, LTC, BCH and BTC. Dan Schulman, president and CEO of PayPal stated “Enabling cryptocurrencies to make purchases at businesses around the world is the next chapter in driving the ubiquity and mass acceptance of digital currencies.”

 

Digital dollar conversations persist

 

According to Bloomberg, the U.S has started to take more action researching what a digital dollar might look like. Researchers from the Federal Reserve Bank of Boston and MIT have been preparing a prototype that could be tested this Summer. In contrast, European Central Bank President Christine Lagarde recently stated “The whole process — let’s be realistic about it — will in my view take another four years, maybe a little more. But I would hope we can keep it within four years.”

 

It is well known that China has been aggressively testing their DCEP currency in highly populated regions. This monetary arms race could have effects on future trade wars and policy. In other international news, India continues to flirt with banning crypto despite interest from younger generations. If Nigeria’s crackdown is anything to go by, sometimes bans can ignite interest and usage. 

 

A new high for capital raises in crypto?

 

When we compare ICO raise numbers of 2017 to the recent VC interest in crypto, it’s an apples to oranges comparison. One was powered by retail exuberance testing out new financial plumbing, the latter involves some of the biggest banks and funds in the world backing crypto native firms with sizeable investments. Every week there is a new list of names, Blockchain.com raised $300 million in a deal that highlights VC’s current eagerness to back crypto firms. The company now has a $5.2 billion valuation.

 

Chainanalysis raised $100 million backed by Paradigm, Addition Ribbit and others, doubling its valuation to over $2 billion. Also in March, TaxBit raised $100 million in its Series A financing, the company builds software that automates tax services from the crypto assets. The raise involved Paradigm, Tiger Global, PayPal Ventures, Winklevoss Capital and Coinbase Ventures.

 

A catalyst for new ATHs?

 

In April, all eyes could be on the public listing of Coinbase. There is arguably a lot of pent-up demand to get crypto exposure which is clear from the amount of new institutional products coming to market. There is clear demand for a bitcoin ETF which may be many months away. The Coinbase IPO now valued at an exuberant $100 billion will be fascinating to watch, as well as bitcoin’s correlating volatility and price action. 

 

GSR update

 

GSR is excited to be backing the Vega Protocol, a highly anticipated project in the compelling world of Defi. Vega is a protocol for creating and trading margined financial products on a fully decentralised network.

Read more about the capital raise here 

The team is also pleased to announce our support for Shyft Network.

“The Shyft platform can bring some of the fastest growing and creative segments of crypto to institutional audiences. We are looking forward to providing strategic backing, and building compliant infrastructure for the #DeFi ecosystem. We believe it’s likely that DeFi will need scalable KYC solutions if it is to disrupt financial services on a global scale”. — Cristian Gil, Co-Founder of GSR.

Additionally, GSR is backing Eco. The Eco platform is designed to be used as a payment tool for daily use transactions. Learn more about Eco here.

 

Open roles 

 

GSR continues to expand at a fast pace across all departments, view all of our open roles here.

 

 

 

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