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Digital Assets Update - 1/18/2023



MARKET OVERVIEW BY JOSH BURKE, DEFI TRADER


Crypto Market Hints at a New Era of Growth: A Rally, Neutral Sentiment and Deflationary Trend


Last week, the cryptocurrency market experienced a notable uptick, with both Bitcoin (BTC) and Ethereum (ETH) leading the charge with gains surpassing 20%. This rally propelled the total crypto market capitalization to briefly reclaim the $1 trillion mark for the first time since November 2020, a positive indicator for the market's overall health and sentiment.


The Fear and Greed Index, which is a widely used metric for gauging market sentiment, recorded a neutral score of 52 for BTC, a marked improvement from the previous week's score of 25 (extreme fear). This suggests that investor sentiment towards BTC has improved, and that the market may be shifting towards a more optimistic outlook.


Ethereum also performed well, with a deflationary trend being observed, where the supply growth rate for ETH currently stands at -0.10% per year. This indicates that the demand for the cryptocurrency is outpacing the new supply, which is a positive sign for the long-term value of ETH.


In terms of fund flows, digital asset investment products saw minor inflows totalling $9.2 million last week, which is a positive development as it shows that investors are becoming more confident in the market and are starting to see potential for growth. Additionally, Ethereum broke an 8-week streak of outflows, indicating that the trend is shifting towards a more positive direction.


Furthermore, the founders of 3AC, Zhu Su, and Kyle Davis, and the founders of CoinFlex, have launched a new project named GTX, which aims to raise a seed fund of $25 million to trade claims from creditors. This is a noteworthy development as it showcases the continued development of new and innovative projects within the crypto space, providing more options for investors and traders.


The past week has been a positive one for the cryptocurrency market, with various indicators pointing towards a more optimistic outlook. It is important to note that the crypto market is highly volatile and investors should always conduct their own research and diversify their portfolio accordingly.


NFT MARKET NEWS BY MATTHEW LINARES, SENIOR ANALYST


Chinese NFT Platforms Move to Hong Kong to Avoid Compliance Risk


NFT platforms in China are expanding into Hong Kong to offset compliance risk for an industry that remains in a legal gray area on the mainland. ShucangCN, a rapidly growing NFT platform that debuted in China in January 2022, has established NFT China Ltd. The CEO stated that this decision was made following the release of supportive cryptocurrency policies by the government in October. “We’re in the process of launching a simple NFT platform in Hong Kong in about two weeks that can facilitate NFT airdrops,” Pengfei Wang, CEO of ShucangCN, told Forkast in a phone interview. “Sales and trading features will follow when the team sets up payment routes'' he added. This move to Hong Kong may both help to offset compliance risk, and allow for a wider range of services to be offered to users. The Hong Kong platform will allow mainland users to transfer their NFTs on the mainland – to the company’s Hong Kong marketplace and trade there. “Once our secondary trading platform in Hong Kong is set up, users can choose to mint and trade directly in Hong Kong, or they can mint on the mainland platform and trade in Hong Kong,” Wang said.

China banned cryptocurrency transactions in 2021, but Hong Kong in contrast has set up a new licensing regime that may eventually extend to retail cryptocurrency trading. Current regulations in Hong Kong, a special administrative region of China, allow only institutions and professional investors with portfolios of $1 million or more to trade digital assets. Although Chinese regulators have yet to spell out hard and fast rules for NFTs, state media has attacked “speculative behavior” in the sector. But that hasn’t stopped China’s consumers from buying and trading digital collectibles, and many platforms including ShucangCN offer such services. In 2022, ShucangCN had about 30 million yuan ($4.5 million) in revenue with a gross profit margin ratio of 30% according to CEO Wang. In June, it launched its main NFT trading platform Huashu Wenchuang in collaboration with Chinese cultural equity exchange Huaren Exchange Center of Culture Property, a platform that typically trades property rights and ownership of traditional artworks, and saw tens of millions of yuan of NFT trades through the end of last year, according to Wang.


LATEST NEWS BY SAM EISNER, ASSOCIATE


WELCOME FRIENDS: Hundreds of institutions and prominent individuals have invested directly in crypto, adopted the value thesis, or started building technology to support digital assets since Wave started tracking this metric in late 2020. Now the rise of the Metaverse, Decentralized Finance (DeFi), Non-Fungible Tokens (NFTs), and Decentralized Autonomous Organizations (DAOs) is driving mainstream adoption of blockchain technologies everywhere we look. We’re continuing to keep track of it every week here:

  • Ava Labs and Amazon Web Services (AWS) have partnered to accelerate enterprise, institutional, and government adoption of blockchain. AWS supports Avalanche’s infrastructure and dApp ecosystem through the AWS Marketplace. Also, Avalanche node operators can run in AWS GovCloud for FedRAMP compliance use cases , a vital capability and a pre-requisite for enterprises and governments.

  • South Korea is bringing Seoul to the metaverse, launching a virtual replica of the capital city with a goal of improving its public services. Known as Metaverse Seoul, the virtual world is estimated to be completed by 2026. The initial stage invites citizens to use avatars to get their tax questions answered, access youth counseling, find support for small businesses and even read e-books.

  • Bradesco, Brazil's second-largest private bank, launched its first tokenized bank credit note on Friday. The bank completed the transaction for a total of 10 million Brazilian reals – equivalent to $1.95 million

REGULATORY ROUNDUP: We're living through the era of regulatory recognition of digital assets. The legislation, litigation, and regulation happening today will dictate the entire future of our industry, and we have a historic chance to shape those changes by staying informed and exerting political influence.

  • In a UK Parliamentary hearing last week, the Economic Secretary of the Treasury and City minister, Andrew Griffith, outlined the regulatory agenda for the crypto-asset sector and HM Treasury’s stance towards the industry. This includes the regulation of stablecoins in the Financial Services and Markets Bill (FSM) and the promotion of crypto-assets.

  • El Salvador’s congress has passed a digital securities law that would allow the nation to issue Bitcoin-backed bonds, also known as Volcano Bonds.

  • The European Union’s landmark crypto legislation, the Markets in Crypto Assets regulation, or MiCA, has been delayed until April because of issues in translating the rules into the 24 official languages in the EU.


DISCLOSURE:

The opinions expressed herein are those of the author alone and do not represent Wave Financial, LLC or any of its affiliates. The author may hold investment positions in some of the assets discussed.


Nothing in this post should be interpreted as an offer or recommendation to buy, sell or hold any security or other financial product. Wave is federally regulated by the US Securities & Exchange Commission as an investment adviser. Registration with a federal or state authority does not imply a certain level of skill or training. Additional information including important disclosures about Wave Financial LLC also is available on the SEC’s website at www.adviserinfo.sec.gov. Or, learn more information about Wave Financial at www.wavegp.com.

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