The week in cryptos bustled with activity, with interesting discussions at the in-person conference in London, Token2049.
Most notable was the talk among leaders in the digital asset space, including Coinbase and Galaxy Digital, about the shift in crypto adoption to Europe. And there’s more to come, with a war for crypto talent too.
Further afield, the US regulator took a step to approve an ETF tracking companies with bitcoin exposure. Watch this space to see if there’s more from the Securities and Exchange Commission on whether that existing frameworks can be used to provide investors with regulated products to access cryptos.
Meanwhile, George Soros’ family office confirmed their interest in digital assets, and Bank of America launched its digital asset research by way of a primer report.
The closest thing to a bitcoin ETF now has SEC approval
The US Securities and Exchange Commission has given the green light for an ETF consisting of companies with large amounts of exposure to bitcoin on their balance sheet.
The portfolio is set to include about 30 companies, including PayPal and Tesla.
The regulator’s approval of the Volt Crypto Revolution and Tech ETF comes as the wider market awaits approval for a pure bitcoin ETF.
In its 7 June SEC application, Volt said it defines companies with exposure to bitcoin as “Bitcoin Revolution Companies”.
These companies hold or have held bitcoin on their balance sheet “for treasury management purposes” or otherwise. They could also be companies that are actively using, investing in, developing, mining or have products that are poised to benefit from bitcoin and bitcoin’s blockchain technology and/or the potential for increased efficiency that it provides to various business processes.
The ETF would also include companies that develop, produce or provide technology and/or cloud services or equipment that facilitates or supports the creation or transmission of bitcoin or blockchain technology, or otherwise benefits from or relies on bitcoin, blockchain technology, transactional innovations, and cryptocurrency.
It also noted that the fund would invest 25% in assets in Virginia-based software firm MicroStrategy Incorporated.
“MicroStrategy is generally bullish on bitcoin and may be positioned to benefit in a rise in bitcoin value due to their willingness to convert free cash into bitcoin. MicroStrategy is also a leader in championing the benefits of bitcoin to the world,” Volt’s filing reads.
Bank of America joins the pack with insights for digital assets
Bank of America has published new research into digital assets and cryptocurrencies.
The digital asset universe is “too large to ignore,” with a $2tn-plus market value and 200 million-plus users, the US lender said.
The note, first reported by Bloomberg, emphasised that the digital asset ecosystem is about “so much more” beyond bitcoin, including the development of tokens, decentralised applications, central bank digital currencies, and non-fungible tokens.
And while the space is crowded, a new generation of companies is fast evolving for digital asset trading, offering cross-industry applications including finance, BofA’s crypto and digital assets analysts Alkesh Shah and Andrew Moss said.
Decentralised applications and NFTs were lauded for being the most innovative, an ecosystem that allows users to use financial products and services such as lending, borrowing, insurance and trading, without relying on a traditional financial institution, Shah and Moss said.
The key takeaway is that the next 30 years will see major change in what is right now only the start of the first innings, BofA’s analysts said, based on the rate of adoption of cryptocurrency trading, which had 221 million users globally as of June 2021, up from 66 million at the end of May 2020. Companies that fail take this on board or gear up to use of decentralised software with distributed ledgers and blockchain at the heart may be forced to exit.
Corporates also need to keep up because holders of digital assets are getting younger, BofA warns.
“These generations grew up with the internet and expect native internet transactions to be frictionless and digital – without multiple steps and middlemen,” the note said.
How a DeFi update accidentally sent $90m in comp coins to users
The founder of Compound, a popular decentralised-finance staking protocol, took to Twitter this week to beg for the return of $90m worth of tokens which was accidentally sent to users during an upgrade.
“Keep 10% as a white-hat. Otherwise, it’s being reported as income to the IRS, and most of you are doxxed,” Robert Leshner, founder of Compound Labs, said in a tweet on 7 October.
DeFi Llama, which tracks DeFi protocols, notes Compound’s total locked value of $9.65bn ranks it as the world’s fifth-largest DeFi protocol. Compound’s native token, comp, dropped 13% on the day of the news.
Protocols like Compound aim to provide blockchain-powered traditional banking and exchange systems. But Compound’s update appeared to have a bug that resulted in users accidentally being issued with comp tokens.
This isn’t the first time a DeFi protocol has lost out to this sort of issue — Alchemix had a similar run-in a few months ago, according to blockchain security researcher Mudit Gupta. He told CNBC the exchange lost just $4.8m in that encounter.
There isn’t any legal requirement for users to return the tokens. And Leshner’s threat to ‘dox’ — publicise the information about who holds the tokens — could be tricky from a public relations perspective.
Regardless, the US tax authority would consider the sum received in error to be income, and therefore likely taxable.
Here’s how shiba inu became the world’s 12th largest crypto
Shiba Inu’s shib token jumped 42% over 24 hours this week, reaching a market capitalisation of $15.4bn, making it the 12th largest cryptocurrency globally, according to a ranking by CoinGecko.
The crypto, inspired by memes featuring the Japanese dog breed shiba inu, made the leap after Tesla boss Elon Musk tweeted about his new puppy.
Following his support for dogecoin, Musk bought a shiba inu puppy named Floki.
A tweet featuring a picture of the dog on 4 October kicked off shib’s latest bull run, pushing the coin’s value up about 370% in the last week.
But unlike dogecoin, Musk has not said whether he owns any shib. He has also not said whether he is or intends to be affiliated with the project behind the token.
George Soros’ family office owns bitcoin
Soros Fund Management, the family office named after the billionaire investor, said this week it is trading in bitcoin.
At a 5 October Bloomberg summit, the fund’s chief investment officer Dawn Fitzpatrick said that “from our perspective again, we own some coins, not a lot, and the coins themselves are less interesting than the use cases of DeFi and things like that.”
The fund also invests in crypto firms like Lukka and NYDIG, Blockchain News reported, but this is the first public confirmation of the move to digital assets.
Bitcoin surged by nearly 10% shortly after the news, hitting around $55,000.
Alongside institutional investors, the world’s richest individuals are increasingly delving into crypto holdings. UK billionaire Simon Nixon’s family office Seek Ventures also said it approved a move to increase cryptocurrency interests, Blockchain News reported.
To contact the author of this story with feedback or news, email Penny Sukhraj