BTSE Weekly Digital Asset Industry Report – January 5th

Welcome to the latest edition of our Market Roundup, where we cover the highlights of the past week in the rapidly evolving world of blockchain and decentralized technologies.

The week in crypto has been all about Bitcoin, where the crypto market saw a notable rebound with Bitcoin (BTC) climbing back to $44,500. This follows a recent flash crash following reports of a potential rejection of a U.S. spot BTC ETF. Despite the news, investor confidence appears to remain strong, as the market quickly recovered from the 10% drop, indicating a positive outlook for the approval of spot-based ETFs by the U.S. Securities and Exchange Commission (SEC). The anticipation surrounding these ETFs has contributed to a significant increase in investor interest. In 2023, digital asset investment exchange-traded products (ETPs) attracted over $2 billion in inflows, marking it as the third largest year for net inflows since 2017. The majority of these investments occurred in the final quarter, driven by the growing likelihood of the SEC approving Bitcoin spot-based ETFs in the U.S. Bitcoin dominated these inflows, accounting for $1.9 billion or 87% of the total, the largest ratio ever seen, surpassing the previous high in 2020. Goldman Sachs, a major Wall Street bank, is reportedly in talks to be an authorized participant for the ETFs proposed by BlackRock and Grayscale, highlighting the increasing mainstream financial interest in cryptocurrencies.

India’s Digital Rupee’s Milestone: India’s digital rupee, the central bank’s digital currency, achieved a significant milestone by surpassing one million transactions in a single day on December 27, 2023. This accomplishment was partly driven by several banks that integrated the digital rupee into their operations.

Visa’s Web3 Loyalty Platform: Visa is piloting a Web3-based customer loyalty platform, offering an innovative approach to customer engagement. This platform, named the Visa Web3 Loyalty Engagement Solution, allows brands to create digital wallets for storing reward points and experiences on behalf of consumers.

Michael Saylor’s Bitcoin Investment Plan: Michael Saylor, the executive chairman of MicroStrategy, has commenced the sale of $216 million worth of the company’s stock, with plans to buy more Bitcoin for his personal account. This move involves selling 310,000 shares, awarded as stock options in 2014, which were set to expire in April 2024.

South Korea’s Crypto Payment Ban Proposal: South Korea’s Financial Services Commission (FSC) proposed an amendment to its credit finance act aimed at prohibiting local citizens from using credit cards to purchase cryptocurrencies. This measure is intended to prevent the illegal outflow of domestic funds, curb money laundering, and reduce speculative trading.

Ethereum ETF Prospects: The U.S. SEC has implicitly acknowledged Ethereum (ETH) as a commodity, a significant development that hints at the potential approval of a spot Ethereum ETF in 2024. This perspective is based on the SEC’s approval of ETH futures ETFs in October 2023 and its non-interference with the coin’s classification as a commodity by the Commodity Futures Trading Commission (CFTC). 

European Banking Authority’s New Focus on Crypto and Banks: The European Banking Authority (EBA) is intensifying its focus on the potential impact of non-bank financial institutions (NBFIs), including cryptocurrency-related entities, on traditional banks. As reported by the Financial Times, the EBA’s concern about financial contagion has led to plans for deeper investigation into the connections between banks and NBFIs.