Dispatch #206: The Best Asset for Banks

Aug 23•4 min read

In this patch of your weekly Dispatch:

  • Ethereum Dynamics 🧨
  • Stablecoin Advantages 🗽
  • Economic Recovery ❤️‍🩹

The Big Idea 

Bitcoin and Banks: Buy? HODL? Both!

Week in, week out Dispatch serves you with a weekly dose of Bitcoin hype. And it’s for good reason. Last week we discussed the headwinds that Bitcoin holders face, while in Dispatch #206, we’re doubling down with a follow-up based on a few powerful confessions. 

  • “In traditional finance, they have no idea about the amount of money and the volume [of Bitcoin]." These were the words of Franklin Templeton CEO Jenny Johnson. Speaking at the Wyoming Blockchain Symposium, she highlighted that Bitcoin processed over $36.6T in transactions in 2023 – vastly outpacing Mastercard's $9T and Visa's $14.8T.

  • Institutional investors are rapidly embracing Bitcoin ETFs, with holdings reaching $11B by the second quarter of 2024, according to ETF issuer Bitwise CIO Matt Hougan. Analyzing the latest SEC 13F filings, Hougan noted a 14% rise in the number of institutional holdings, from 965 to 1,100 entities. “This is a great sign,” Hougan said, highlighting that despite Bitcoin's 12% price drop in Q2, institutions continue to buy in “and they’re coming in size.”

  • Bitcoin traders aggressively betting on a price drop might soon be caught off guard. According to K33 analyst Vetle Lunde, the market is “ripe for a short squeeze”, driven by a surge in open interest and negative funding rates in the derivatives market. “This suggests aggressive shorting, structurally creating a setup ripe for a short squeeze,” Lunde explained. The funding rate hit a low of -2.53%, its lowest since March 2023.

Naturally, our Nexo analysts pitched in. Structured Products Lead Kristian Haralmpiev spoke with Investing.com, noting BTC’s price is range-bound until a few key events occur. HODLing is a default mindset for many Bitcoin investors, but could this plateau in Bitcoin’s price turn out to further strengthen your holdings? It’s what banks seemingly do.

The Latest In…

Ethereum’s Path to Recovery?

You’d think Bitcoin’s dominance (more on that in the chart below) will leave Ethereum aside? Not on our watch. Before we get the latest from its determined founder, Vitalik, here are the ETH facts this week:

  • $2 Billion Inflows in spot Ethereum ETFs in nearly four weeks since launch.

  • The fourth-largest ETF launch. This is what we’d get if we combined all ETH spot ETFs into a single fund. 

  • Global ETFs have attracted $911B year-to-date, with US-traded spot crypto ETFs contributing $17B.

Market Challenges. Ethereum has seen weak performance, down 40% in the past month. Ethereum’s gas fees have dropped to a five-year low, with some transactions costing under $0.04.

The Latest In…

The (Purchasing) Power of Stablecoins

Stablecoins are proving crucial in regions with unstable local currencies, helping mitigate the economic impact of currency volatility. A recent report highlights that from 1992 to 2022, volatility caused a 9.4% GDP loss across 17 emerging markets, totaling $1.2T.

  • In Brazil and Indonesia, stablecoins have emerged as a reliable store of value. Additionally, they’ve unlocked $11.6B trapped in traditional cross-border payment systems. Efficiency gains are expected to generate $2.9B in economic returns by 2027.
  • Stablecoin adoption is growing in Turkey, Thailand, and Brazil. Projections indicate that global stablecoin payment volumes could reach $15T by 2030, with the market cap potentially exceeding $1T.

The Latest In…

The Rate Cut That Matters

The Federal Reserve is gearing up for a potential interest rate cut in September, Reuters reports.

  • Upcoming Rate Cut: The Fed is likely to cut interest rates in September. The July 30-31 meeting minutes revealed a “vast majority” of officials support this move, with expectations for up to a full percentage point reduction by year-end.
  • July Meeting Insights: Although rates were kept steady in July, the Fed signaled a potential easing in the September 17-18 meeting. Some officials were ready to cut rates even in July due to cooling inflation and rising joblessness.
  • Future Cuts: Analysts anticipate up to three consecutive 25-basis-point cuts by the end of 2024, with the possibility of a larger half-percentage-point cut if job market conditions deteriorate.

The Latest In…

The Dubai Court of First Instance has confirmed that crypto payments for salaries are legal, marking a major shift in the UAE’s approach to digital currencies. The ruling came from a case where an employee’s salary was partially paid in EcoWatt tokens. The court's decision, reflecting the UAE's growing acceptance of crypto, emphasizes the importance of clear contractual terms in digital payments and could pave the way for broader adoption.

The Week’s Most Interesting Data Story

The Crypto Dominator 

Bitcoin's market dominance has surged to 56% of the total cryptocurrency market cap, up from 38.7% in November 2022, signaling a shift in investor preference, highlights a Glassnode report. This rise reflects growing confidence in Bitcoin amidst market volatility and evolving institutional interest. Despite recent price turbulence, long-term holders are increasingly accumulating Bitcoin, with "HODLing behavior" outpacing spending.

Hot Topics

What the Community is Discussing:

Let’s stay patient, everyone.

How solid is that response?

Is staying (safe) on the sidelines a trading strategy?

What to Watch for Next Week:

  • Bitcoin trading at an ATH?

  • Ethereum’s upgrades ahead

  • The growing crypto ecosystems