Behind crypto’s early summer rally

Singapore is among the growing list of countries exploring new web3 initiatives like tokenization. [Meriç Dagli via Unsplash]

There’s never a dull moment on the blockchain. Here’s what you need to know this week:

Inside bitcoin’s latest rally. Wall Street boosted BTC to a 12-month high.

A growing list of countries are pursuing crypto ambitions. Brazil, Japan, and Singapore are all making web3 moves.

Noteworthy numbers. The percentage of Fortune 100 companies that have pursued crypto initiatives, and other key stats to know this week.

R$629,488.59

R$20,074.31

R$16.70

R$5.50

R$921.72

R$5.50

See the latest prices

MARKET UPDATE

Bitcoin hits 12-month high after Wall Street giants double down on crypto plans

Boosted by a wave of positive crypto news — with BlackRock, Fidelity, Charles Schwab, and other Wall Street giants announcing new initiatives in the space — crypto markets rallied this week. BTC hit a 12-month high north of $31,000 Friday as ether (ETH), bitcoin cash (BCH) and a wide range of other cryptocurrencies also spiked. As of Tuesday, crypto’s total market cap was up around $180 billion over the previous week. Let’s take a deeper look.

Wall Street has been making major crypto news, despite ongoing U.S. regulatory uncertainty. Last Tuesday, Fidelity, Charles Schwab, and Citadel launched a new crypto exchange for institutional investors called EDX. Only BTC, ETH, BCH, and litecoin are available to trade on the platform. Meanwhile, BlackRock, the world’s largest asset manager, applied for SEC approval for an exchange-traded fund (ETF) that would buy BTC and sell shares to investors via conventional brokerages. Firms including ARK Invest and WisdomTree followed, and Fidelity is reportedly preparing its own BTC ETF bid.
Following the launch of EDX, Bitcoin Cash got the biggest boost, with prices up nearly 80% four days later. According to crypto market research firm Santiment, “The sudden price move has attracted retail trader attention, with social discussions about the token rising to their highest in three years and trading volumes this year hitting a record.”
As of Monday, around $200 million had flowed into crypto-related investment products during the previous seven days, making up for half of the preceding nine straight weeks of outflows, according to a report from European digital asset manager CoinShares. “We believe this renewed positive sentiment is due to recent announcements from high profile [fund] issuers that have filed for physically backed ETFs with the U.S. Securities & Exchange Commission,” the report said.
Even though BTC prices are up, the overall number of trades remains relatively low, possibly indicating that the biggest cryptocurrency by market cap’s current rally is driven more by big-money institutional investors than by everyday retail traders. Per CNBC: “Big funds and crypto-focused hedge funds are among the market participants driving the action.”

Why it matters… All markets can be impacted by public sentiment, and for crypto, the recent narrative has been clouded by uncertainty arising from the actions of U.S. regulators. But now, as some of the biggest finance firms in the world make major new investments, the narrative may be shifting. Speaking last week at the Coinbase State of Crypto Summit (co-hosted by the Financial Times), BlackRock’s head of strategic partnerships Joseph Chalom said, “I think there's an element of, ‘We need institutional custodians to step in and play roles and participate in digital token economies.’”

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WORLD WIDE WEB3

Brazil, Japan, and the countries making crypto moves

With crypto markets waking up, there has also been a steady drumbeat of news around governments, central banks, and commercial banks driving crypto adoption. Countries including Brazil, Singapore, and Japan have made major announcements about central bank digital currencies (CBDCs), tokenized assets, and regulatory developments — highlighting what the next wave of crypto use cases could look like around the world. Here’s what you need to know.

Brazil is using its leading crypto exchange to help launch its CBDC.

For decades, the global finance system has been a mind-bogglingly complex mishmash of physical money, digital systems, and a variety of often outdated back-end “rails” for moving capital around the world. Seeking to simplify things, central banks in dozens of countries are working on CBDCs, digital versions of their currencies that exist only as code. (The Bahamas and Nigeria are among the countries that have already successfully launched CBDCs.)

Of course, cryptocurrencies like bitcoin solve a lot of these problems, which might be why Brazil has tapped Mercado Bitcoin, the country’s largest crypto exchange, as a launch partner for the country’s CBDC. In Brazil, officials are hopeful that a digital real can help expand financial services to the country’s 30 million-plus unbanked residents. Most CBDC experiments don’t explicitly rely on blockchain technology, but Brazil’s central bank has indicated the digital real could also be compatible with smart contracts and DeFi use cases.

Singapore, HSBC, and JP Morgan are collaborating on use cases for tokenized assets.

Singapore is working with a consortium including the Bank for International Settlements, JP Morgan, Citi, and other finance giants to explore the “tokenization” of various financial assets, according to a new study from the Monetary Authority of Singapore.

JP Morgan, for example, is part of a pilot that is exploring the creation of more global liquidity pools for government bonds, and has already successfully tested cross-currency transactions using tokenized Japanese Yen and Singapore dollars. Multinational bank Standard Chartered is experimenting with tokenized securities that trade on Singapore’s stock exchange. And HSBC has piloted tokenized debt products, and concluded that they cut down on costs and settlement times.

Japan eased crypto tax rules for startups.

In a move that should make Japan more attractive for web3 businesses, the nation’s tax authority has reversed its decision to implement a 30% tax on unrealized gains for cryptocurrency held by companies.

While Japan is among the global leaders in crypto regulations, having adopted a legal framework for stablecoins, the previous tax rule was criticized for being particularly burdensome on crypto startups. “For the time being, people who want to do [a web3 business], can now do it without leaving the country,” noted Japanese crypto entrepreneur Sota Watanabe, who moved his firm Stake Technologies to Singapore in 2020.

The bottom line…

While the U.S. stalls on comprehensive crypto policy, the rest of the world is moving forward — or as a recent Japan Times headline put it, the lack of U.S. action is a “boon for Japan.” In regions like the U.K. (where a16z is opening a new crypto hub) and the European Union (which passed comprehensive crypto rules in April), governments are laying the groundwork for the industry’s next phase. And in a surprise reversal, even the International Monetary Fund, which has long been skeptical of cryptocurrencies, has softened its opposition: Three senior economists recently warned governments that crackdowns on crypto “may not be effective in the long run.”

Read up on crypto in the U.K.

NUMBERS TO KNOW

$87.5 million

Current valuation of crypto-meets-AI startup Kaito after a $5.5 million Series A funding round. Kaito is an AI-powered search engine that aims “to provide a whole new search experience to the entire crypto community,” by synthesizing on-chain data and other real-time information from all over the web. Over the last few months, well known crypto projects, including Solana and Etherscan, have added artificial intelligence tools, as buzz for tech’s AI trend continues to grow.

5,630 BTC

The Lightning Network’s new all-time high bitcoin capacity as of Saturday, according to The Block. The Lightning Network is a “layer-2” scaling solution that enables faster and cheaper BTC transactions by moving them off the main Bitcoin blockchain, sort of like an express lane on a highway. The new all-time high coincides with BTC’s latest rally, which was boosted by Wall Street.

$55

Price of a day pass for Bathhouse, a Brooklyn-based spa that warms its pools with heat generated from its bitcoin mining rig and recycles colder water to cool its mining equipment.

52%

Percentage of Fortune 100 companies in the U.S. that have pursued crypto, blockchain, or web3 initiatives since the start of 2020, according to a new corporate adoption report from Coinbase in partnership with The Block. The research also indicates that the U.S.’s regulatory approach is a top barrier to U.S. leadership of the global financial system.

Approximate number of days until Litecoin’s next halving. Like Bitcoin, Litecoin undergoes a periodic process in which the amount of crypto awarded to miners decreases by half. Halving is a tool some cryptocurrencies use to combat inflation.