Connecting the Dots
Episode 100 - The 100 Club
Episode 100 ! Thanks to all of you that have joined us so far ! Given its our 100th episode anniversary, we like to ask a small favour. Could you share our newsletter with a friend to help us on our growth journey. Much appreciated !
Welcome to the new subscribers that have joined us over the last week. The aim of this newsletter is to help you navigate the world of crypto. There’s an incredible amount of information out there so we try to distil it into the things you MUST know each week, covering both macro and crypto.
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Onto the newsletter. Here’s what you’re getting this week:
Macro Update: Our latest view on the macro and its impact on crypto markets.
Crypto Native News: Solana ETF’s filed, Binance still expanding its compliance staff, Trumps media group files for the TruthFi trademark.
Institutional Corner: Labour MP delivers a keynote speech at the Tokenisation Summit, Mastercard integrates its blockchain system to JP Morgan’s Kinexys
Charts of the Week: Bitcoin CME futures hits record open interest, ETH futures open interest reaches an all time high, ETH/BTC trades at a 4 year low.
Top Jobs in Crypto: Featuring Coinbase, Revolut, Global Games Show, Crypto.com, Blockdaemon, MoonPay, Jump Trading and BNB Chain.
Macro Update
This is where we connect the dots between macro and crypto.
The 100 Club
We signed off last week’s newsletter with “let’s get this party started” and that party certainly seems to be in full swing right now 💃🏽🕺🏽 The Bitcoin 100K champagne bottles look ready to pop as, somewhat poetically, we write this 100th episode of Connecting the Dots🍾
With little in terms of top tier macro data to deter the party goers, risk had a better week, with broad based gains across the US equities complex. Another strong earnings report from NVIDIA helped maintain the positive sentiment. US bonds in the long end also posted positive returns, easing some of the yield headwinds that we cautioned about.
Of course, it was Bitcoin and the broader crypto space that outperformed everything as it continues to ride the “red wave” and the paradigm shift in the regulatory outlook as the US flips from being a headwind to a powerful tailwind for this still nascent industry.
Paradigm political shift…
Nothing more symbolically reflected this powerful shift, than the resignation of Gary Gensler, who abused his position as SEC chair, trying to disrupt and destroy the crypto industry to pursue his sociopathic ambitions and political agenda. I think we speak on behalf of everyone who believes in progress and public bodies meant to serve the interests of the people they represent, when we say, good riddance Gary 🎉
It’s hard to understate the significance of this 180 degree shift in the US political outlook for the digital asset space. Bitcoin was always going to outlast any political administration and its borderless, de-centralised nature makes it an unstoppable force. We’ve arrived at this point despite political backing of major economies, not because of it.
Yet, for institutional money to really start to flood into this space, a clear regulatory framework needs to be established and a political environment that is supportive, not disruptive to the growth of the industry. The appointment of Scott Bessent, the veteran hedge fund manager, to the position of Treasury Secretary is another significant appointment fuelling the Bitcoin optimism. Bessent is an advocate of crypto, backing the Trump administration’s vision for digital assets and has said “crypto is about freedom, and the crypto economy is here to stay” and views Bitcoin as aligning with Republican’s free market principles.
Cash that had been sidelined is starting to move into Bitcoin and this is creating a powerful and positive demand shock which is coinciding with the recent negative supply shock of the bitcoin halving. Bitcoin has always performed strongly post the halving and US election, but this feels more significant. Whilst there’s plenty of supply to absorb into 100k as long term HODLERS take some well deserved profit, this is still very early in the cycle and we’re set to enter the typical exponential phase but with this added demand shock. That shock would be especially powerful if the US were to make Bitcoin a strategic reserve asset. Bitcoin may well surprise even the most bullish of us in where it trades this cycle 👀
Dollar headwinds…
The macro as it relates to Bitcoin then, has taken somewhat of a backseat as this move towards 100K has been a pure, idiosyncratic, demand/supply driven phenomenon. The US dollar however continues to push to new highs, with the DXY index above 107, its highest levels since November 2022, and this is still creating a headwind for BTC and broader risk.
A large part of that is being driven by EUR weakness (the biggest FX component of the dollar basket) as the economy continues to deteriorate. The Eurozone composite PMI fell to a 10 month low in October at a contractionary 48.1, with the manufacturing sector falling deeper into recession, but also services starting to stumble. Worryingly, Germany and France, the Eurozone's two largest economies are at the heart of the current weakness. Expectations for a 50bp December rate cut from the ECB are growing taking EUR$ briefly below 1.04.
The dollar wrecking ball can act to tighten global liquidity and financial conditions, especially in the face of disorderly moves that force the likes of China and Japan to sell FX reserves to defend domestic currency weakness. Of course, eventually, the Fed, as the world’s Central Bank, will be forced to flood the system with dollars to alleviate the stress (Bitcoin and Gold will anticipate that) yet we typically need to feel some risk pain before that trigger point is reached.
Into month end, we expect this dollar strength to pause and trade softer as US equity outperformance means hedge ratio adjustments need to sell USD this week (foreign investors that hedge US equity portfolios need to hedge out the excess dollar gains in their portfolio) which should ease the headwinds to broader risk.
The demand/supply dynamic remains in the drivers seat for Bitcoin, but a softer dollar would give a final helping hand to take us through $100k. But go easy on those 100K celebrations as this Bitcoin party is just getting started🚀
Native News
Key news from the crypto native space this week.
On Thursday, Cboe BZX Exchange submitted four 19b-4 filings for asset managers to list spot Solana exchange-traded funds (ETFs). If approved, the Bitwise, VanEck, 21Shares and Canary Capital-issued spot Solana SOL ETFs will be listed on the Chicago Board Options Exchange’s BZX Exchange. The filings came — coincidentally or not — as anti-crypto SEC Chair Gary Gensler announced he would resign on the day of Donald Trump’s presidential inauguration. Gensler was supposed to serve until 2026.
According to a press release from Binance on Friday, the world’s largest crypto exchange, says it expects to have 645 full-time compliance employees on staff by the end of the year — a 34% increase from last November. Including contractors, the crypto exchange already has over 1,000 employees focused on compliance. Noah Perlman, Binance’s chief compliance officer who started in January 2023 said that in 2023, Binance increased its compliance spend by 36%. "Our industry has entered a paradigm shift and new phase of maturation where regulatory compliance is an essential standard to user experience and protection, business success, and responsible growth,” Perlman said. “Binance has matured alongside regulators and other players throughout the years, and the continued growth of our compliance team and program are a testament to that and this shift in our industry which is set for strong sustainable growth."
Trump Media & Technology Group, of which President-elect Donald Trump owns a 53% stake, on Monday filed a trademark application for "Truthfi," a platform used for trading digital assets and other payment processing services. The filing also mentioned services for "Downloadable computer software for use as a digital wallet." The application was filed the same day a report broke that Trump Media & Technology Group was in “advanced talks” to acquire Bakkt, the crypto platform that offers licensed and regulated custody and trading for digital assets. "Josh Gerben, a Washington D.C.-based trademark lawyer, said that [Truthfi] filing is a way for Trump Media to reserve the TruthFi name if it goes forward with a crypto business," the Times reports. "He said that companies can usually reserve a name for as long as a few years. But companies typically file a trademark application with the intent to use it." Read the full filing HERE.
Institutional Corner
Top stories from the big institutions
London City Minister, Tulip Siddiq MP delivered a keynote speech at the 2024 Tokenisation Summit, marking a significant milestone in the UK's approach to regulating digital assets. This is the first time Labour has publicly shared their stance on the matter. Whilst the speech was not detail-heavy, it was encouraging to hear the EST express her support for the sector, highlighting the "transformative potential of cryptoassets" and their ability to "disrupt" the status quo, "revolutionise financial markets," and "change our lives." Excitingly, it was emphasised that crypto is here to stay, and the UK must lead the global race. Here are some of the key takeaways:
𝐒𝐭𝐚𝐤𝐢𝐧𝐠: Staking is not a Collective Investment Scheme (CIS), although no timeline was provided for legislation.
𝐑𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐂𝐞𝐫𝐭𝐚𝐢𝐧𝐭𝐲: Stressed the need for regulatory clarity while giving firms the space to innovate, adopting the previous government's approach "in full" based on industry engagement and consultations.
𝐒𝐭𝐚𝐛𝐥𝐞𝐜𝐨𝐢𝐧 𝐑𝐞𝐠𝐢𝐦𝐞: Will be designed and implemented concurrently with the broader cryptoasset regime, a positive development that avoids potential delisting of stablecoins.
𝐏𝐫𝐨-𝐒𝐭𝐚𝐛𝐥𝐞𝐜𝐨𝐢𝐧 𝐒𝐭𝐚𝐧𝐜𝐞: At odds with the Bank of England's position, the EST advocated for stablecoins to be used in both retail payments and wholesale settlement. HMG will not regulate stablecoins under the UK payment regime/PSRs, instead introducing a new regulated activity for issuance and custody, indicating a lighter regime for stablecoin transfers compared to e-money.
𝐎𝐧-𝐂𝐡𝐚𝐢𝐧 𝐒𝐞𝐭𝐭𝐥𝐞𝐦𝐞𝐧𝐭: Highlighted the importance of stablecoins as the only on-chain settlement instrument currently in existence, necessary for driving tokenisation.
𝐍𝐞𝐱𝐭 𝐬𝐭𝐞𝐩𝐬: Further announcements on staking, stablecoins, and the broader cryptoasset regime will be made early in the new year, likely through FCA consultations.
Speaking at the North American Blockchain Summit on Thursday, CFTC Commissioner Summer Mersinger discussed the need for standard US crypto-related policies through notice and comment regulation. Mersinger also said recent litigation against a decentralised autonomous organisation (DAO) required the CFTC to seek a court verdict for entity classification. In this case, the CFTC wanted to classify the DAO as a corporation or association. She said “I really started to get uncomfortable with this idea that we were kind of setting some sort of policy through our enforcement cases and through going to court. To me, how you’re going to treat an entity that’s a policy question.” Moreover, she supported the introduction of new laws and regulations for crypto firms despite her predominantly conservative stance adding “What we’re seeing right now is that without those laws, you have agencies like the Federal Communications Commission (FCC) who can come in and create chaos and bring charges where maybe it doesn’t fit.” Despite its small size compared with the other agencies such as the SEC, Mersinger said that the CFTC is the “ideal regulator for the cryptocurrency spot market” as it can implement major legislative changes fairly quickly without disruptions to the market.
Mastercard has connected its blockchain-based system for tokenised assets, the Multi-Token Network (MTN), with JPMorgan’s recently rebranded digital assets business Kinexys (formerly known as Onyx). The collaboration is intended to enhance B2B cross border payments, “providing greater transparency and faster settlement as well as reducing time zone friction.” Mastercard said it has invited a number of banks onto its MTN when the platform emerged in mid-2023 with a view to testing out tokenised bank deposits, the use of stablecoins and central bank digital currencies (CBDC). Mastercard’s token network is working specifically with the JPMorgan’s Kinexys Digital Payments, which was formerly known as JPM Coin. Naveen Mallela, co-head of Kinexys by J.P. Morgan said in a statement “At Kinexys, we believe our solutions can play a transformative role in the ecosystem for digital global commerce and digital assets, where the value proposition of commercial transaction venues is enhanced by the availability of commercial bank payment rails that can natively integrate with any digital marketplace or platform”
Charts of the Week
Because charts are just as important as macro.
Bitcoin futures open interest (OI) on the Chicago Mercantile Exchange (CME) hit a record 218,000 BTC ($21.3 billion), more than a third higher than before the Nov. 5 election.
Ethereum futures open interest on exchanges rose over 12% in 24 hours to an all-time high of $20.8 billion on Friday.
The ETH/BTC trading pair fell to 0.03302 BTC this week, a near 4 year low.
Top Jobs in Crypto
Well, we all want to work in Crypto don’t we. Here’s a bit of help on your job search!
Institutional Sales Associate, Derivative Sales at Coinbase
Product Marketing Manager Crypto at Revolut
Web3 Community Manager at Global Games Show
Business Development Manager, VIP Partnerships at Crypto.com
Sales Development Representative at Blockdaemon
Validator / Blockhain Infrastructure Manager at Jump Trading Group
Technical Ops Support at BNB Chain
DISCLAIMER: The content in this newsletter is not financial advice. This newsletter is strictly educational and is not investment advice or a recommendation to buy or sell any assets or to make any financial decisions. Crypto markets are volatile, please be careful and do your own research.