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:
- Grayscale is still trying to get a bitcoin ETF approved
- Strike ditches the US in favour of El Salvador
- Stablecoins retreat but renewal is key for digital asset progress
Grayscale’s bitcoin ETF bid looks increasingly like a sideshow
Grayscale is yet again attempting to launch a bitcoin spot price ETF, per reports in the FT. After push back from regulators it looks like the firm has come up with a dilution wheeze to get around rules that prevent the launch.
But Grayscale’s efforts are beginning to look increasingly like a sideshow as more innovative DeFi products and services get up and running. The whole point of a bitcoin ETF is it gives access to a digital asset via TradFi platforms and institutions. But increasingly those institutions are looking to DeFi to provide fresh answers at lower cost.
Ultimately this attempt to back-hack a digital asset onto old tech is only viable if the cost structure is as attractive as in DeFi. As Swarm is doing, the future now lies in digital, real world asset (RWA) backed tokens, giving investors access to deep investment markets with all the benefits of self custody, instant settlement and regulatory compliance.
Institutions and investors want access to the kinds of assets that have a long history and market dynamic underpinning them – be it shares in Apple or Tesla, or commodities such as gold. But new forms of digital trading platforms with 24/7 market access and instant settlement are the real revolution here. Low cost ETFs are already tradeable as digital assets, making the need for a bitcoin instrument with a high cost structure effectively redundant.
Strike’s US departure illustrates a big problem for the country
Major bitcoin infrastructure firm Strike has announced it is expanding into 65 countries while moving its headquarters to El Salvador.
The politics of El Salvador’s quirky relationship with bitcoin aside, the move underpins something really important that is happening in North America at the moment. The regulatory pitched battle underway, which extends from the SEC through Congress and to individual states, is having such a toxic effect on the sector that firms such as Strike are looking for new homes.
This isn’t the threat of moving, this is firms voting with their feet and getting out of the way of a highly uncertain regulatory environment. This is totally unsustainable for the US, which is now at real risk of losing out to a fast-growing industry.
The other side of the coin on this is what is happening in Europe. Projects such as Bakkt have announced they are moving to base within EU jurisdiction, making it clear that the certainty of the MiCa framework has no small influence on their decision.
There’s no need for theoretical postulating on this. The net effects of uncertainty and certainty are clear. If the US doesn’t start to make coherent noises about how DeFi firms can operate then they’ll soon be on the losing side of the huge changes underway in the sector.
Stablecoin retreat and renewal are key to digital asset progress
Stablecoins saw a major shrink in value in 2023. The digital asset market is reliant on these tokens regaining investor confidence before real fundamental expansion can proceed.
Real world assets (RWAs) are emerging as one of the biggest growth areas for DeFi in 2023. Core to this are stablecoins, which are effectively one of the original forms of RWA – as their value is underpinned by non-digital fiat currencies. Stablecoins underpin much of the system as they provide an essential point of interconnectivity between TradFi and DeFi.
The retreat of stablecoins in 2022 harmed progress in ways we won’t fully appreciate for years to come, but this issue is completely resolvable through the promotion of transparency and high quality collateral through the facilitation of a healthy digital RWA ecosystem.
Investors have matured in the digital asset space and are now looking to hold the same kinds of assets they always have, from company stocks to T-Bills, at an attractive cost structure. Reliable and transparent stablecoins are symbiotic to this and provide a way forward for the sector that leaves behind untrustworthy and unfounded crypto tokens in the past.
