Maven's Insights May 2021

01 June 2021

VanEck is moving forward with two exchange-traded products (ETPs) related to digital assets in Europe. VanEck listed its Vectors Bitcoin exchange-traded note (ETN) and Vectors Ethereum ETN on the Dutch and France exchanges of Euronext, the company said. “Bitcoin and Ethereum have firmly established themselves on the market as the two largest cryptocurrencies," said Martijn Rozemuller, CEO at VanEck Europe. “Due to their low correlations to other asset classes, they provide an interesting opportunity to diversify one’s investment portfolio.”.

Ethereum, the second largest blockchain by market capitalization, has seen a significant increase on a year-to-year basis. For instance, total transaction fees, also known as the network revenue, increased 200x to $1.7 billion in Q1 2021, compared with $8 million in Q1 2020. For the month of April, Ethereum generated an annualized revenue run rate of $8.6 billion. Total transaction volume on Ethereum increased 20x to $713 billion in Q1 2021, compared with $33 billion in Q1 2020. The Ethereum ecosystem has also shown amazing results, with DEX volumes increasing 76 times to $177 billion and the total value represented by Decentralized Finance increased 64 times to $52 billion compared to the same quarter last year.

This month, digital assets were a hot topic among various well-known investors. Even though the Bitcoin price has gone down, they were rather excited about the possibilities it presented. First, there was Ray Dalio from Bridgewater. He stated that he prefers Bitcoin over bonds as a trade. While previously skeptical of digital assets, he now states “Personally, I’d rather have bitcoin than a bond” Dalio said during a conversation with CoinDesk. Another hedge fund giant, Carl Icahn, also held a skeptical view of digital assets before. He is now looking at investing over USD 1B into the space, stating that digital assets are “here to stay in one form or another,”. Finally, Stanley Druckenmiller, who previously expressed excitement about Bitcoin, stated the following on a podcast: “as long as Jay Powell keeps acting like he’s been acting, I think gold and Bitcoin — and Bitcoin seems to be high-beta gold — are going to have the wind behind them.”.

UBS Group AG is in the early stages of offering clients digital assets investment possibilities, joining U.S firms in seeking to give broader access in response to client demand. The Swiss firm is exploring several alternatives for offering the asset class, people familiar with the plan said options include investing through third party investment vehicles. “We are monitoring the developments in the field of digital assets closely,” UBS said in a statement. “Importantly, we are most interested in the technology which underpins digital assets, namely the distributed ledger technology.”. 

FinCEN is seeking input from companies that deal with privacy technology such as zero-knowledge proofs, an encryption method used in conjunction with blockchain networks in which a transaction can proceed without requiring sensitive information from the participants, as well as homomorphic encryption. “This program is an example of FinCEN’s ongoing dedication to advancing the integrity and innovative strength of the U.S. financial system, which includes balancing transparency and accountability with the important principles of privacy and security,” Furthermore, acting Comptroller of the Currency, Michael Hsu, expressed  that regulatory agencies in the United States should establish a “regulatory perimeter” for digital assets and cryptocurrencies. Hsu also indicated U.S. regulators will look to take a more active role in policing the crypto asset sector with an emphasis on minimizing the associated risks faced by investors and consumers.

The online sales platform eBay is now permitting the sale of non-fungible tokens (NFTs) for digital collectibles. The company said that an "NFT inventory will be provided to sellers who meet eBay's standards." Users can bid on NFTs as they would for a physical item. In other NFT news, Fox is launching its own NFT company, Blockchain Creative Labs. The company will create, sell and manage NFTs, tokens and digital goods.

This month we also announced several venture investments. First, Qredo, a decentralized custody solution. We are impressed by them providing the safest and easiest way to onboard institutional capital into digital assets. Second, PoolTogether, a no-loss lottery. We participated in their treasury diversification sale. Since then, we have continuously been impressed by the PoolTogether’s DAO efforts to grow towards 1 million USD in prize money. Third, Zapper, a DeFi dashboard which makes it easy for more novice users to utilize everything DeFi has to offer. Finally, Flux Protocol announced their seed round in which we participated. Flux offers the most reliable and scalable way to query off-chain data on-chain. This is critical infrastructure. Jasper, co-founder of Flux also appeared on a podcast with us. You can listen to it here (in Dutch).