#102 ETFs, RWAs and politics. Crypto is out in the real world.
The first steps of the ETH spot ETF, what the US elections mean for crypto, where RWAs are standing today and where they’re moving.
Neat freaks will be very happy with how 2024 is playing out. In January the launch of spot Bitcoin ETFs kicked off the bull run; and halfway through the year, the spot Ethereum ETFs were approved (in May) and started trading (this week in late July).
Pantera Capital rescued a famous quote from the Watergate lore in their blockchain newsletter: “Once the toothpaste is out of the tube, it’s going to be very tough to get it back in.”
The ETH ETF might or might not become massive soon. We don’t really care. But the regulatory endorsement implied in the decision is a point of no return.
At the same time, there’s a trend mirroring the inflow of funds to crypto through ETFs (not in size, only in direction), and it’s represented, how else, by another acronym: RWAs.
Real World Assets are another bridge built between TradFi and DeFi, but this time the whole point is to attract capital and investors from crypto into financial vehicles that leverage traditional assets to generate yield thanks to the rise in interest rates from the last years.
This year will mark a new ATH in crypto’s integration with “the normal world”. It’s not only a tale of ETFs and RWAs: This weekend we are having a former and possible future US president speaking at a Bitcoin conference. Crypto has never been bigger as an item in the political agenda.
Read on to learn all the details about the first steps of the ETH spot ETF, what the US elections mean for crypto, where RWAs are standing today and where they’re moving.
ETH spot ETFS start trading
Approved in May, the much-anticipated Ethereum ETFs took weeks and weeks to get the finall regulatory blessing. This week, finally, on July 23rd, trading for nine ETH ETFs kicked off, marking a significant development in the cryptocurrency investment landscape.
Volumes were impressive. Trading volume crossed the $1B mark on day 1, and made 23% of what big brother BTC spot ETFs did in January. A few of the most relevant ETFs made it to the top 10 in the list of most successful ETF inaugural days ever.
Nevertheless, these numbers cloud the fact that the outflows from Grayscale’s ETF make a big chunk of the trades. The final balance on day one looked more like $100M in positive flow.
Here’s a great source to track the fund movements of ETH spot ETFs.
But the real story does not lie here, at least for now. Ethereum is now a well-established asset in the financial field. That’s one more step towards the adoption of crypto as a financial asset; one less battle to worry about, in the path towards the establishment of a new infrastructure for digital economies.
Who’s Crypto’s Candidate?
One thing was clear: Joe Biden was unlikely to be crypto’s ally in Washington. His administration's reliance on figures like Elizabeth Warren and Gary Gensler suggested continued struggles for crypto if he won re-election.
Donald Trump, however, seized the opportunity and aligned himself with the crypto community, leveraging his NFT collections and his choice of VP candidate, JD Vance, a man with a credible reputation in crypto.
Trump’s vocal support for the industry, especially in the form of Biden and Gensler criticism, will culminate in his appearance at the Bitcoin conference in Nashville this weekend.
The choice seemed straightforward until Biden’s potential successor, Kamala Harris, came into focus. Although rumors about her attending the Nashville conference proved false, it’s known that her team has sought advice from crypto-friendly investor Mark Cuban to shape Harris’ crypto policy.
This shift offers a new glimmer of hope for liberal-leaning crypto enthusiasts where previously there was only uncertainty.
Vote Like Selkis or Vote Like Buterin?
In the current US election climate, two prominent figures in the crypto community present two starkly different positions crypto can take.
Ryan Selkis, founder of the research firm Messari, known for his outspoken political stance, harsh criticism of Biden’s administration and relentless animosity towards Gary Gensler, has become a strong Trump supporter. His support peaked following the assassination attempt, with Selkis sharing and then deleting a statement reading "Anyone that votes against Trump at this point can die in a fucking fire". In follow-up, non-deleted tweets, he stressed for the need for armed self-defense.
Selkis eventually resigned from his position and has promised to devote his influence to promoting a Republican win.
In contrast, Vitalik Buterin, Ethereum's founder and chief scientist, advocates a more moderate approach. He has cautioned against single-issue voting, emphasizing the importance of crypto values such as freedom and privacy. Buterin also warns about opportunism and the risks of quick gains from untrustworthy individuals
He names no names, but I think we all know what he means.
Real World Assets: Same Bridge, Opposite Direction
ETFs aren’t the only area where crypto and traditional finance intersect. Real World Assets (RWAs) are emerging as another significant trend for 2024.
RWAs involve representing off-chain assets with on-chain equivalents. Some stablecoins are an example of RWAs, when they are digital twins of USD or USD equivalent assets held in banks.
Tokenization has been praised by TradFi aristocracy for enhancing liquidity, availability, and transparency in trading.
BlackRock, a leader in both ETFs and RWAs, manages BUIDL, a fund that tokenizes cash, U.S. Treasury bills, and repurchase agreements on the Ethereum blockchain. This allows whitelisted traders to operate with the autonomy intrinsic to blockchain technology. While BlackRock didn’t invent RWAs, their involvement has significantly advanced the sector.
Recent developments include Binance’s approval to invest customer fiat funds in U.S. T-Bills and Coinbase’s reported efforts towards a tokenized money market fund. Top crypto ecosystems are also increasing their RWA engagement with attractive incentive programs. For instance, Ethena, a notable protocol for 2024, proposed allocating part of its USDT holdings and surplus buffer to RWA products. Similarly, Maker’s “Spark Tokenization Grand Prix” aims to invest $1 billion in tokenized U.S. Treasury offerings, and Arbitrum’s STEP Committee plans to invest 1% of DAO treasury assets annually into RWA products (first allocation, almost ready).