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🟣 The Institutional and Regulatory Divide

According to a report by investment firm VanEck, a significant amount of bitcoin, roughly $175 billion worth, is being held by various entities.

Author

Marc-Thomas Arjoon
May 07, 2024

Welcome back to 0xResearch – quick hitting alpha for the crypto degens. Here's what we got for you today:

  • 15% of BTC held by ETFs, nations, and companies

  • BlackRock is making significant moves into tokenization

  • Robinhood received a Wells Notice from the SEC

  • Another spot ETF decision delayed

According to a report by investment firm VanEck, a significant amount of bitcoin, roughly $175 billion worth, is being held by various entities. This includes ETFs, several countries, and both public and private companies. 

VanEck's report highlights a growing interest in bitcoin among institutional investors, such as hedge funds and asset managers. These investors seem to view bitcoin as a valuable asset for long-term holding. This is further supported by the fact that the total value of all bitcoins held by these entities, represents approximately 15% of the total supply.

BlackRock and Blockchain Funds

ETFs aren’t the only fund BlackRock is dominating in. Their BUIDL fund has overtaken Franklin Templeton's BENJI fund to become the largest tokenized treasury fund in the world. BUIDL, the BlackRock USD Institutional Digital Liquidity Fund, has grown to $382M in assets under management, surpassing the $368M in Franklin Templeton's OnChain U.S. Government Money Fund (BENJI). Tokenization of real-world assets like Treasuries has become a hot trend, with over $1.3 billion worth of U.S. Treasuries now existing across various blockchains. However, investor demand for these tokenized products remains low at the moment due to thin liquidity. What’s more, BlackRock recently announced that it led a $47M funding round for Securitize, a leading tokenization platform. Overall, BlackRock and other major asset managers see tokenization as a way to make capital markets more efficient.

SEC adds Robinhood to its list

Outside the institutional space, not all is sunshine and roses as the SEC is taking action against Robinhood's crypto business. The Securities and Exchange Commission issued a Wells Notice to Robinhood, indicating that the agency staff is recommending enforcement action against the company. The SEC alleges that Robinhood violated securities laws by failing to register as a broker-dealer for its crypto offerings. This follows Robinhood's delisting of several cryptocurrencies in June 2023, which the SEC had previously identified as unregistered securities. Dan Gallagher, Robinhood's chief legal officer issued a response;  "We firmly believe that the assets listed on our platform are not securities,". This development highlights the ongoing regulatory scrutiny of the cryptocurrency industry.

Another spot ETH ETF delay

The US Securities and Exchange Commission (SEC) has postponed its decision on Invesco Galaxy's application for a spot Ethereum ETF until July 5th. In recent months, the SEC has delayed decisions on applications from all eight prospective Ether ETF issuers, including BlackRock, Fidelity, Franklin Templeton, Hashdex, and Ark 21Shares, in line with analyst expectations. With the SEC citing the need for more time to consider the proposals, analysts are now less optimistic about the SEC approving any Ether ETFs anytime soon.

– Marc Arjoon (X: @marcarjoon | Fracaster: @marcarjoon) 

  • Evidenced through APT, SEI, SOL and SUI price performance over recent months, 2024 Q1 brought a resurgence in interest for high throughput blockchains and parallel execution.

  • Aptos stands out from the others through its capability to handle large verifiable transaction loads with sub-second latency, as well as its integration of the Move programming language. Combined with Aptos Keyless and Aptos Passkeys, this enables a powerful developer and user experience when compared to other contenders.

  • Technological innovations, such as the Block-STM execution engine, the Move Prover, and Quorum Store, fuel a secure, lightning-fast execution environment, designating Aptos as a perfect home for the next generation of tokenized assets, DeFi, gaming, and consumer and AI applications.

  • Network data shows promise that Aptos is at an inflection point, where a blossoming ecosystem of dApps is ready to onboard a new wave of users. Aptos Ascend competitively positions the network to onboard TradFi entities and RWAs with baked-in compliance and customizability on day one.

1MB price of Ethereum as a DA layer:

Post EIP-4844, rollups are using the network more efficiently, with significant reductions in fees (-71%) and gas usage (-54%). Transaction volume on rollups has also grown substantially, however, there was an increase in fork rates.

On the positive side, the new fee mechanism for blob transactions seems to be working as intended, with higher priority fees compared to non-blob transactions. This market shows more volatility than the standard gas fee market, but may more accurately reflect demand.

Overall, the upgrade seems to be a positive step for Ethereum, but some areas need to be monitored and potentially improved.

Despite the Bitcoin halving, this wasn't a kind month to Bitcoin bulls as BTC fell 13% MoM, its worst monthly performance since January 2022. April 19th marked Bitcoin’s fourth halving which saw block rewards decrease from 6.25 BTC to 3.125 BTC per block. Inflows into BTC ETFs slowed this month while total AUM and daily volume also declined. Bitcoin Runes launch was lackluster and Ordinal prices also declined, however, Bitcoin ecosystem activity and the “TVL” of L2s continued to increase.

With the spot BTC ETF behind us, the market can now turn its attention to a potential US spot ETH ETF approval/denial on May 23rd while Hong Kong’s first ETH ETF has started trading. April marked the first full month post the Dencun upgrade leading to a 90%+ reduction in L2 fees. Demand for restaking protocols continued strong with EigenLayer hitting $16B in TVL. However, ETH saw an 18% drawdown MoM alongside a downturn in the wider stock, bond and crypto markets.

TAO has led the decentralized AI narrative throughout the year. Compared to other decentralized AI related tokens, such as Akash (AKT) and Render (RNDR), Bittensor is more encompassing, and attempts to cover more of the decentralized AI stack. A recent proposal, BIT001, is a necessary upgrade to continue to foster and incentivize founders to build on Bittensor, while preventing further dilution of TAO, both in emissions and in attention.

CFTC Chairman Rostin Behnam said a growing crypto industry and lack of US laws is going to inevitably lead to more enforcement actions.

The Solana proof-of-work project took off in early April.

The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.