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Weekly Update: 15th of May

Hodl Team
Hodl Team
15 May 2024
Welcome to our weekly update, where we provide insights into the latest developments in the digital assets market.

What happened between the 8th and 15th of May?

  • ARK and 21Shares drop the staking component from their Ether spot ETF application while Grayscale withdraws its application for a futures Ether ETF. Read more

  • The European Union is considering crypto integration into the $13 trillion mutual fund investment market. Read more

  • In April, the monthly trading volume in the digital assets industry dropped for the first time in seven months, decreasing by 28%. Read more

  • Collapsed exchange FTX proposes a $16.3 billion compensation plan to repay creditors, offering 98% of its creditors a 118% recovery repayment. Read more

Asset managers change their Ether ETF plans

In an updated filing submitted on the 10th of May, digital asset manager 21Shares removed the clause that stated a portion of the fund’s assets could be staked through a third-party provider. Despite the lack of formal remarks, Bloomberg ETF analyst Eric Balchunas believes the modification is an effort to adjust the application in response to expected input from the United States Securities and Exchange Commission (SEC). The final deadline for 21Shares Ether spot ETF is set for the 24th of May, but many market participants expect the SEC to deny all applications. Furthermore, on the 8th of May, asset manager Grayscale withdrew its Ether futures ETF just three days before the SEC would give its decisive answer, leaving many market observers confused.

The EU is considering including crypto assets in mutual fund framework

The EU is considering including crypto assets in its “Undertakings for Collective Investment in Transferable Securities (UCITS)” framework, which represents its mutual fund framework worth $12.88 trillion. The EU’s financial market watchdog, the European Securities and Markets Authority (ESMA), has initiated a review of the framework, with crypto assets as one of the focal points. The agency is also seeking insights from industry stakeholders to assess the potential risks and rewards of potential integration. Unlike ETFs in the United States, which focus on specific assets and require individual permissions, UCITS funds can encompass several cryptocurrencies without the need for separate authorizations. This could be a significant development; however, the EU typically moves slowly with such matters, so it may take years before a definitive answer is reached.

The monthly trading volume decreased for the first time in seven months

In April, the digital assets industry witnessed a 28% decrease in trading volume compared to March, ending a seven-month streak. Although this may sound concerning, from February to March, the volume increased by over 90% as Bitcoin ETFs gained enormous momentum. Therefore, the volume is reverting to the mean as Bitcoin ETFs cool down and geopolitical tensions rise. However, the cumulative trading volume still stands high at approximately $6.6 trillion, nearly twice as high as the average month in 2023. So, although it is a contraction, we believe that the upward trend will continue as the year progresses.

Collapsed FTX proposes a $16.3 billion compensation plan

On May 7th, FTX released a statement proposing a $16.3 billion compensation plan for its creditors. The plan is subject to finalization and approval by the United States Bankruptcy Court for the District of Delaware. This amount is twice the size of the shortfall left by FTX, which was approximately $8 billion. However, the plan states that only creditors with claims below $50,000 would be eligible for 118% recovery of their claims, comprising 98% of all creditors, according to FTX. Additionally, FTX will reimburse creditors based on the value of their assets at the time of bankruptcy, not at current market prices, despite some creditors' requests for the latter, particularly given the significant increase in digital asset values since the bankruptcy, with Bitcoin experiencing a rise of approximately 280%. If approved, repayment would take place within 60 days. The question on many market participants' minds is whether these funds may enter the digital assets industry as the funds are paid in dollars. So, fresh liquidity may enter the market in the upcoming months.

In other digital assets news

  • A sudden surge in meme stock Gamestop has caused digital asset investors to grab their chances in meme coins resulting in a strong upward movement for these highly speculative assets.

  • Wells Fargo, an American multinational financial services company, has disclosed that it holds shares in the ProShares Bitcoin strategy, Grayscale Bitcoin trust, and Bitcoin Depot, a crypto ATM provider.

  • The State of Wisconsin Investment Board (SWIB), which oversees the state pension fund, has revealed that it had acquired over $100 million worth of BlackRock's $IBIT Bitcoin ETF and $63M in Grayscale’s GBTC.

 

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