Around the block

Highlights:

Steps toward maturation

2023 may mark the beginning of a maturation phase for the broader crypto ecosystem in the eyes of market participants. While crypto remains highly speculative, some key trends can accelerate its potential legitimacy as an asset class.

Institutional adoption

Institutional adoption comes in many forms. Corporations utilize crypto firm technologies, especially in the area of smart contract platforms like Ethereum, to gain operational efficiencies at lower costs. Asset managers, exchanges, and custodians are combining expertise to launch new products and financial infrastructure. Governments have accelerated efforts to develop Central Bank Digital Currencies (CBDC’s).

Regulation

As we discuss in our regulatory section on p. 2, the news has quickly shifted from SEC regulatory enforcement actions to three new bills, that may strengthen the crypto space, have passed though the House Financial Services Committee.

Easy to understand use cases

New digital payment solutions are proliferating. FedNow, while not a cryptocurrency, has created a sense of urgency as evidenced by PayPal’s stablecoin launch and accelerated CBDC efforts by global central banks to create instant payment solutions to gain global economic advantage. 

Chart of the month – Altcoins showing signs of life

Altcoins is a catch-all term for cryptocurrencies other than Bitcoin. The first half of 2023 was dominated by surging returns of the two largest cryptocurrencies, bitcoin and ether. However, July performance was marked by altcoin outperformance as bitcoin and altcoin returns diverged for two possible reasons.

• First, bitcoin volatility has been bumping along low levels in its 15 year history, trading in an unusually tight range as market participants await an SEC decision on approval of a bitcoin ETF.
• Second, the favorable court ruling that Ripple (XRP token) is not a security was a positive short-term catalyst for other altcoins not wanting to fall under the blanket of SEC oversight.