Thursday, 6 June 2024

Market Summary

Market Summary 6 June 2024

Bitcoin Price: US$ 70,978.95 (+0.75%) 
Ethereum Price: US$ 3,865.99 (+1.46%) 

In a recent speech to the U.S. House Financial Services Committee, Hilary Allen, a professor at the American University Washington College of Law, voiced her concerns about the fragility and inefficiency of public blockchains for tokenising real-world assets, a viewpoint that stands in stark contrast to BlackRock CEO Larry Fink’s prediction of an inevitable tokenisation of all stocks and bonds. Meanwhile, Paxos International is making strides in the financial technology space by issuing an interest-bearing stablecoin called the Lift Dollar (USDL), which will be regulated in the Abu Dhabi Global Market (ADGM) and will generate overnight yield from the interest earned on its reserves. In parallel, Coinbase is set to launch a smart wallet, a technology not new to the market and initially introduced by Loopring and Argent in 2020. This innovative wallet offers users a seamless onboarding experience, eliminates gas fees, and removes the need for recovery phrases, allowing users to create a new wallet and onboard onto a blockchain without the need for a new app or recovery phrase, marking a significant step forward in user convenience and blockchain accessibility. 

Franklin Templeton CEO Jenny Johnson, a firm believer in the early phase of Bitcoin investment, anticipates the entry of larger institutions in the next wave of adopters. She recognises the potential of blockchain technology, highlighting its lower data processing costs and innovative applications, such as Rihanna’s use of NFTs to tokenise royalty rights to her song. However, the cryptocurrency market experienced a downturn in May 2024, with a 20.1% drop in combined trading volume on centralised exchanges to $5.27 trillion. Despite this decline, the derivatives market’s dominance surged, buoyed by the SEC’s unexpected approval of spot Ether ETFs. SEC Chair Gary Gensler has hinted at a potential delay in the final approvals for these ETFs, suggesting a longer timeline for the next steps. Nevertheless, the SEC has already initiated the process for listing shares on exchanges, with spot Ether ETF 19b-4 approvals coming five months after the approval of several spot Bitcoin ETF applications. 

The Central Bank of the United Arab Emirates (CBUAE) has approved a new system for licensing and overseeing stablecoins as part of the government’s Financial Infrastructure Transformation (FIT) program. The regulations stipulate that payment tokens must be backed by UAE dirhams and cannot be linked to other currencies, digital assets, or algorithms. Furthering the FIT initiative, the CBUAE also announced plans to issue a central bank digital currency (CBDC) to address cross-border payment inefficiencies and drive domestic payment innovation. In a related development, the Dubai Financial Services Authority (DFSA) recently updated its rules for stablecoin recognition, introducing additional criteria and allowing investment in unrecognised crypto tokens, provided the investment does not exceed 10% of the funds’ gross asset value. In other news, Bitcoin miner Riot Platforms reported a 43% decrease in Bitcoin production in May due to the Bitcoin halving event, but countered this with an infrastructure upgrade and the launch of a new mining facility in Texas. Riot also made headlines with its offer to buy competitor Bitfarms, offering a combination of cash and common stock amounting to $950 million in equity value for shareholders. Meanwhile, US-based spot Bitcoin exchange-traded funds (ETFs) saw their second-best-ever joint net inflow day of $886.6 million, with the Fidelity Wise Origin Bitcoin Fund (FBTC) seeing the largest inflow. This occurred despite the Grayscale Bitcoin Trust (GBTC) reporting over $17.8 billion in net outflows due to its high management fee and narrowed discount, although it did report a rare inflow day of $28.2 million. 


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