GM. It’s Wednesday, July 24.

Newsmakers

What to Know as ETH ETFs Launch in the United States

In another victory for the crypto industry, the U.S. SEC, on Monday, approved eight spot Ethereum ETFs for trading on regulated exchanges, a prospect that seemed like a long shot just months ago. Tuesday, funds from VanEck, 21Shares, Invesco Galaxy, Fidelity, and Franklin Templeton began trading on Cboe; Bitwise and Grayscale on NYSE Arca; and BlackRock on the Nasdaq. Grayscale also launched a mini ether ETF. As Matt Hougan, chief investment officer at Bitwise notes, more than 70% of the liquid crypto market is now accessible through these products.

The debut marked a milestone for the Ethereum network. Predictions about long term inflows vary widely, but the real question on everyone’s lips is how well they will perform in comparison to the Bitcoin ETFs whose January debut Reuters called one of the most successful in history. However, the comparison may be unfair.

The funds generated over $1B+ ($) in trading volume by mid-morning, more than most ETF debuts, though less than their BTC counterparts. Kraken’s Thomas Perfumo notes that ETH ETFs don’t need to match BTC ETFs to be considered a success, given ETH’s market cap is about a third of BTC’s. Ethereum also has a more complex narrative. “If Bitcoin is digital gold, then Ethereum is the open-source App Store . . . for exposure to the thousands of applications that will utilize blockchain technology,” Kyle DaCruz, head of digital assets at VanEck, told CoinDesk.

Unlike Bitcoin, ETH can be staked and, currently, 28.1% of the supply is locked into staking and another 10% is locked into smart contracts. Ethereum co-founder Joe Lubin told DLNews that the ETFs could open a “floodgate” of demand against a supply more constrained than that of BTC.

At this point in time, the U.S. ETH ETFs do not include staking, which was denied by the SEC. An anonymous source told CoinTelegraph the key issue is liquidity. It can take several days to withdraw staked ETH, but issuers are obligated to redeem ETF shares upon request. Solutions such as funds holding a buffer of liquid spot Ethereum are being explored.

Read more →Cointelegraph

Governments Holding Bitcoin: Potential Impacts

On July 12, the German state of Saxony sold the last of its 50,000 BTC (about $3B worth) seized from Movie2k, ending a three-week spree that helped to drive the recent market dip and shine a spotlight on other government whales. Per Bitcoin Treasuries, nine other governments hold a collective 517,414 BTC worth $32B, accounting for 2.5% of total supply. The U.S. holds the most at 213,246/$13.4B. China holds 190,000/$11.B; the UK 61,000/$3.8B; Ukraine 46,351/$2.9B; El Salvador 5,800/$364.2MM; Bhutan 621/$39MM; Venezuela 240/$15.1MM; Finland 90/$5.7MM; and Georgia (66/$4.1MM).

That’s led to concern in some quarters that governments could collude to manipulate the market. That seems unlikely since the reasons governments acquire and sell digital assets vary and are not necessarily driven by market factors. El Salvador has famously bought BTC as a treasury asset, as have Bhutan and Venezuela, but most governments have acquired theirs through asset seizures.

The bulk of the U.S. stash came from its takedown of dark web marketplace Silk Road. China’s came from the 2019 PlusToken scam, a mining Ponzi scheme targeting investors in China and South Korea. In the UK, metropolitan police seized digital assets linked to investment fraud by two Chinese nationals who laundered the money in the UK. Ukraine has also accumulated BTC through seizures by law enforcement as well as by donations of $225MM since the start of its war with Russia.

How and when seized assets can be disposed of varies by government. In the case of Saxony, sale proceeds of assets seized in the state go to the general state budget unless they exceed €500,000. In that case, 52.5 percent go to the Ministry of the Interior and 22.5 percent to the Ministry of Justice. Confiscated assets can only be sold once there is a court ruling, but an emergency sale can be made if a confiscated item is likely to lose value rapidly. That seems to have been the case here; the state’s case against Movie2k is not yet settled.

The U.S. holds confiscated assets in encrypted offline wallets under federal agency management and sells confiscated assets in accordance with court orders. In the UK, proceeds from the sale of seized funds can be shared between the government and the police. What might trigger China to sell BTC, or how it would distribute proceeds, is unknown.

Read more →Crypto.news

Miners and AI Firms Bond Over Appetite for Computing Power

An avenue of collaboration between crypto and AI is emerging, based on one thing both industries have in common: a huge appetite for computing power. Increasing energy costs and reduced post-halving rewards are driving some mining firms to look to AI firms to add new revenue streams. They’re finding interest from smaller tech firms looking to build computing infrastructure through shared resources.

Lancium, a Houston-based firm that originally focused on providing services to miners, is now partnering with Denver-based Crusoe Energy Systems to build a 200-megawatt data center to support AI workloads using renewable energy sources like flared gas.

Nasdaq-listed miner Core Scientific is “aggressively pursuing” AI partnerships; they’ve recently inked one with Nvidia-backed CoreWeave, an AI cloud provider. Over the next twelve years, they anticipate $4.7B in revenue from CoreWeave’s rentable AI chips in Core Scientific data centers. New York-based Bit Digital recently agreed to rent space in Iceland in a three-year $275MM deal with an AI firm creating large language models.

TeraWulf, which offers zero-carbon mining using nuclear energy, has dedicated two megawatts towards high performance computing capacity to attract AI firms. Canadian miner Hive says it is actively pursuing partnerships.

Coatue Management, a U.S. hedge fund, invested $150MM to help Hut 8, a mining company with an AI division offering GPU-as-a-service, upgrade infrastructure to meet AI requirements. Grayscale, meanwhile, launched a crypto fund containing only AI tokens.

Read more →Financial Times ($)

News In Brief

Business of Crypto

• First Inverse Bitcoin ETF Launches in Hong Kong - Reuters

• Pro-Crypto PAC Fairshake Becomes Largest of Election Cycle With $200MM+ - The Block

• Swan Bitcoin Drops IPO Plan; Will Shutter Managed Mining Ops - CoinDesk

Regulation and Security

• U.S. House Passes Bill Targeting Illicit Crypto Finance - crypto.news

• India Will Keep Stiff Crypto Tax Rules Despite Industry Pressure - crypto.news

• New Crypto Scam Uses Zoom for Theft Via Malware - Cointelegraph

DeFi and Web3

• NPC Raises $18MM Seed to Bring GameFi to Non-Crypto Natives - Bitcoin.com

• Pudgy Penguins’ Parent, Igloo, Raises $11MM for Blockchain Development - The Block

• Christie’s, MoonPay Partner on AI-Generated Art Experience - Cointelegraph

Midweek Market Pulse

Total Market Cap: $2.41T – 7-day as of Tuesday 7/23/24 12 PM EST: +1.3%

Total crypto market cap edged up 1.3% from last week to $2.41T, appearing to have already absorbed the debut of Ethereum (ETH, -0.7%) ETFs as a done deal. Traders seem to be waiting to see how the new ETFs will fare.

Meanwhile BlackRock’s Bitcoin ETF had its best day of inflows since March, taking in $523MM on Monday. BlackRock purchased 7,759 BTC on the day, taking its stash to 333K BTC and $22.2B in assets under management.

Bitcoin (BTC, +2.6%) edged up slightly. News that a wallet belonging to Mt. Gox moved 47.5K BTC worth $3.2B to two unknown addresses on Tuesday was counterbalanced by growing speculation that Donald Trump may announce plans to make BTC a strategic reserve asset at Bitcoin 2024 in Nashville later this week.

Solana (SOL, +9.5%) surged as some investors looked ahead to the possibility of SOL ETFs. The Cboe has earlier this month asked the SEC to allow SOL ETFs from Van Eck and 21Shares to come to market. At the same time, higher user growth, higher revenue from fees, and increased transaction volume on decentralized exchanges (over $2B in trading volume every day over the past week) are also fueling Solana’s rise. Its total value locked has increased 25% over the past month, reaching $5.2B, its highest level since April 2022.

The Last Word

Strategic Reserve

noun

: A collection of assets held back from normal use to have on hand in case of an emergency

/ Strategic reserves can include commodities, machinery, or capital assets.