Welcome to Swarm Markets’ media memo. This weekly update provides comments from Swarm Markets’ co-founders, Philipp Pieper and Timo Lehes, on key industry news that has caught our eye, plus our own developments.
Comments available on the following news items:
- Bank of America RWA report
- US crypto regulatory battle heats up
- Market gives stETH a vote of confidence
Bank of America sees a surge in digital RWAs
A report from Bank of America sees real world assets (RWAs) as a key driver of the digital asset market. Gold in particular has played a tangible part in this expansion with the market topping $1 billion for the first time according to the financial institution.
Bitcoin has frequently been touted as ‘digital gold’ but what could be more compelling than actual digitally available gold ownership? The precious metal lends itself to the forefront of the growing technology but is far from the endpoint. Ownership of stocks, bonds and even property are becoming pervasive and could reach a tipping point before many expect.
As institutional players continue to move into the market and see the benefit of digital RWA ownership it will become the rule rather than the exception. Digital RWA ownership confers greater property right confirmation and protection, with transparency and cuts to the costs of ownership.
Other key aspects such as the fractionalization of ownership is becoming possible and other innovations that give more people and institutions greater access than ever before to digital asset ownership.
The US is tying itself in knots over crypto
Regulation is a really important aspect of a functional crypto market but the US is busy tying itself in knots over how to manage the sector in the wake of high-profile failures in 2022.
The SEC has become significantly bolder in tackling – even chasing – crypto projects and is now on the cusp of going from “management” to “crackdown” on the sector. To make matters even more extraordinary, a pro-crypto US lawmaker has now introduced a bill attempting to sack SEC chief Gary Gensler.
The events unfolding give one signal to firms, individuals and innovators – best not to bother with the US. Until there’s a greater degree of regulatory clarity then the sector is going to continue to offshore itself elsewhere to regions such as the EU where regulation is much more coherent and further along a path to a settled state.
While some aspects of major legislation such as MiCa are not ideal, at least the sector has something to work toward. Regulation is a critical component of a healthy market, and as long as it is left uncertain in the US the longer that the sector won’t be able to move forward.
Ethereum staking holds firm as market signals its stETH approval
With the Shapella upgrade now confirmed, the ETH market and staking levels have remained stable, confounding worries that the market bottom could fall out as soon as large amounts of stETH were unlocked.
The price of ETH moved higher in the wake of the upgrade’s completion, signalling a big vote of confidence from the market in the Ethereum network’s enhanced offering. For the first time stakers are now able to withdraw their tokens, but the TVL of ETH remains firm, not moving significantly in the wake of the network change.
What is key here is the market is still very much searching for decent yields despite interest rates rising. The context here though is these yields are being sought in a digital-first environment. ETH provides around 4.6% adjusted rewards for staking according to Staking Rewards (this changes frequently, however).
But relative to the overall market cap of ETH, the percentage of stETH is still low at around 15%. This indicates there could still be room for the market to grow in staking terms. The providers that begin to offer seamless staking to investors, particularly those institutional investors looking for new kinds of yield-bearing assets, and make it easy enough to switch providers, will reap the benefits of expanding demand.
