Tokenization Could Drive Efficiencies in Capital Markets: BlackRock CEO
Larry Fink, chief executive officer of the world’s largest asset management company BlackRock, believes tokenizing asset classes such as stocks and bonds could foster efficiency in capital markets and improve investor access.
The CEO noted in his latest annual letter to investors that BlackRock is currently exploring the digital asset industry and would continue to do so, especially in areas related to permissioned blockchains and tokenization of stocks and bonds.
BlackRock to Explore Tokenized Stocks and Bonds
In the letter, Fink opined that the operational potential in the digital asset space goes beyond Bitcoin. The CEO disclosed that fascinating developments are ongoing in the nascent industry beyond the hype and obsession with cryptocurrencies.
Despite the failure of major crypto entities like FTX, digital payments are rapidly advancing. Fink believes that innovative applications for the asset management industry could emerge as the digital space grows.
“For the asset management industry, we believe the operational potential of some of the underlying technologies in the digital assets space could have exciting applications. In particular, the tokenization of asset classes offers the prospect of driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors,” he said.
The U.S. is Lagging in Innovation: Fink
The BlackRock CEO also talked about emerging markets like Brazil, India, and parts of Africa that are seeing advances in payment systems and financial inclusion. In contrast, he argued that developed markets like the United States are lagging in payment innovation.
“In many emerging markets – like India, Brazil, and parts of Africa – we are witnessing dramatic advances in digital payments, bringing down costs and advancing financial inclusion. By contrast, many developed markets, including the U.S., are lagging behind in innovation, leaving the cost of payments much higher,” Fink stated.
The last few weeks have seen U.S. authorities clamp down on crypto entities. From regulatory issues with stablecoin issuing company Paxos to the abrupt closure of crypto-friendly Signature Bank, U.S. regulators have toughened their oversight of the digital asset industry.
But Fink believes the digital asset space needs more precise regulation as the industry matures. He hinted that clear rules would help investors become aware of the risks associated with the sector.
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MakerDAO Passes First Vote on Proposal to Increase US Treasury Investments to $1.25 Billion
MakerDAO, a decentralized autonomous organization that issues the DAI stablecoin, has voted in favor of allocating more funds to its current US Treasury investments.
The increase in investments in government treasury bonds aims to diversify DAI’s stablecoin liquid backing through exposure to real-world assets (RWAs).
MakerDAO Votes to Increase Debt Ceiling by $750 Million
The first stage of MakerDAO’s expanded foray into investing in RWAs has concluded with the passing of the preliminary vote to increase the DAO’s real-world asset vault debt ceiling to 1.25 billion DAI ($1.25 billion).
The governance poll, which started on March 13, was active for three days and ended on Thursday, March 16, 2023. Based on the results, the majority of the votes were in favor of the proposal to raise the debt ceiling by $750 million. The debt ceiling in MakerDAO refers to the maximum DAI that can be minted against the collateral in the vault. The current for this vault is $500 million.
This concluded poll is only a preliminary vote. The matter will be put to an executive vote among DAO delegates. If it passes, it will be executed as part of a future governance package.
MakerDAO began its RWA investment strategy last year with a $500 million allocation to U.S. Treasurys. This marked a departure from the protocol’s crypto-native lending strategy since inception. A financial statement from earlier in the year revealed that RWA-based investments contributed 70% of Maker’s gross revenue in December 2022.
Crypto Lending on the Brink?
MakerDAO’s pivot to RWAs comes as the crypto-native lending space took a battering in 2022. This came amid a year-long bear market that saw many participants defaulting on huge loan positions and going into bankruptcy. This sector of the market also seemed to have been hardest hit by the Terra and FTX collapses that exacerbated the bear decline
CeFi lenders such as Voyager and Celsius have gone bankrupt. Meanwhile, they are not alone in this turmoil, as several Solana-based crypto lenders have also sunset their frontend platforms, leading to fears that the Solana DeFi ecosystem might be heading to zero.
Despite this, DeFi lenders are still looking to make progress. Both Aave and Compound have released multichain upgrades of their lending protocols. These platforms are expected to play a significant role in the liquid staking derivatives market that could emerge following the activation of staked ether withdrawals after Ethereum completes its Shanghai upgrade.
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FDIC Denies That Potential Signature Buyers Must Give Up Crypto
Following the collapse of Silvergate bank – one of the two main banks providing financial services to crypto platforms – former clients began pivoting to competitor Signature, only for the latter to be seized by U.S. authorities, citing significant liquidity issues.
Significant Crypto Exposure
Faced with a public lack of trust in the banking sector, U.S. authorities decided over the weekend to place Signature Bank in receivership, informing its leadership mere hours before the public announcement was made. The bank was majorly invested in crypto, with over a quarter of all deposits coming from the industry.
The news dealt a blow to many mainstays of the crypto industry, de-pegging Circle’s USDC and causing uncertainty for Coinbase and Paxos, who, among others, had significant assets stashed away at Signature Bank.
The bank and its assets were put up for sale by U.S. authorities, with the caveat that only potential buyers with an existing bank charter were allowed to take a peek at its financials. This led to both the Royal Bank of Canada and PNC Financial Services ultimately deciding against a purchase.
FDIC Denies any Limitation on Crypto Exposure
At the time, unnamed sources told Reuters that the FDIC had informed potential buyers that they would be required to divest from the cryptocurrency industry completely.
However, a spokesperson for the FDIC has now denied any such limitation, implied or otherwise. As a result, Reuters has updated its previous article to reflect the FDICs’ refutation.
Instead, the FDIC spokesperson allegedly referred potential buyers to an earlier statement, stating only that dealing with cryptocurrency may be a risk.
‘In light of events that highlight a number of risks associated with crypto–assets and crypto-asset sector participants, the agencies issued a statement in January 2023 addressing key risks and are now issuing a statement related to liquidity risks. In light of these heightened risks, it is important for banking organizations […]to actively monitor the liquidity risks inherent in such funding sources, and establish and maintain effective risk management practices.’
According to the spokesperson, potential buyers of Signature Bank are in a position to declare which assets and former clients they would like to take on. Still, they are neither prohibited nor discouraged from continuing existing business relations with the crypto industry.
The FDIC is currently making a second attempt at selling off Signature after a previous attempt last Sunday.
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Was This the Bitcoin Bottom Signal? Fed Pivot Not Far Away According to Analyst
Markets are starting to price in an incoming Fed pivot as bank instability forces central banks to protect the financial system.
Analysis from CryptoQuant analyst Cristian Palusi suggests that the liquidity crises now plaguing commercial banks may be a “long-awaited buy signal” for Bitcoin.
Banks Down, Bitcoin Up
In a post published on Thursday, Palusci noted that the implied federal funds’ policy rates have severely shortened their time frame for when they think the central bank will first cut rates again, from Q1 2024 to June 2023.
Meanwhile, gold and Bitcoin are on the rise: the precious metal surged to nearly $2000 as of Friday, while its oft-considered digital successor rose to another 9-month high of $27,000.
“One of the elements that represented a clear buy signal emerged immediately after the bankruptcy and related bailout of the Silicon Valley Bank: the Coinbase premium,” wrote Palusci. Coinbase (COIN) has risen over 37% over the last 5 days, and is known to be tightly correlated with the crypto asset market that it enables trades for.
“Initially the spread could have had a double interpretation following the depeg of USDC, in light of the recent price action it is clear that instead the premium indicated the enormous buy pressure on the exchange due to the fact that American investors considered the $20K area as a very interesting level,” he continued.
The Pivot is Coming
Silicon Valley Bank (SVB) was home to $3.3 billion worth of Circle’s USDC reserves, with which Coinbase is largely affiliated. When the bank was closed by regulators on March 10th, USDC lost briefly lost its peg to the dollar, and declined alongside both COIN and Bitcoin.
Now, all three have recovered in spectacular fashion after the Federal Reserve promised to bail out depositors to both SVB and Signature. The central bank also launched a special loan program for federally insured depository institutions, which has already been used by banks to borrow $300 billion within a week.
On Thursday, BitMEX co-founder Arthur Hayes called the program a roundabout form of quantitative easing that would ultimately pump Bitcoin – a sentiment with which Palusci agreed:
The investment bank JP Morgan stated that the Fed’s Bank Term Funding Program (BTFP) will inject $2 trillion into the financial system,” he noted, “and with a similar acronym, the buy the dip invitation seems pretty explicit.”
Leverage within the crypto-sphere also appears to be down compared to its level in October 2022, which could “could represent further elements to fuel the rally when central banks formalize the pivot.”
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“Buy the F***ing Pivot:” Arthur Hayes on Bank Bailouts and Bitcoin’s “Endgame”
BitMEX co-founder and crypto-essayist Arthur Hayes published a lengthy blog post on Thursday breaking down the Federal Reserve’s new program to protect the banking system – and what it means for Bitcoin.
The initiative titled the “Bank Term Funding Program” is regarded by Hayes as a “repackaged” form of Yield Curve Control (YCC) that will trigger another bull market for Bitcoin.
QE Infinity
Hayes began by reviewing the macroeconomic backdrop since 2020, from the period of heavy covid related stimulus to the subsequent tightening of interest rates throughout 2022. The ensuing crunch in financial assets crushed bankers’ bond portfolios, and a higher fed funds rate incentivized a rapid withdrawal of deposits from small banks toward higher-yielding money market funds.
This forced those smaller banks to sell the US treasury debt and mortgage-backed securities on their balance sheets at a realized loss – something that forced a bank run against Silicon Valley Bank earlier this month.
To stem contagion surrounding SVB’s collapse, the Federal Reserve bailed out all of the bank’s depositors, and also announced its Bank Term Funding Program (BTFD) to provide liquidity to U.S. banks.
The program lets any federally insured depository institution use government debt and mortgage-backed securities as collateral to borrow money without limit – with collateral valuation at par value, rather than current market value.
According to Hayes, this implicitly allows $4.4 trillion to be printed into the US economy – even more than COVID stimulus, which was worth $4.189 trillion. “During the COVID money printing episode, Bitcoin rallied from $3k to $69k,” he noted.
Hayes also predicted that the US dollar is likely to strengthen even further against other currencies since the US has set a precedent of guaranteeing depositor funds within systemically important US banks. Then, to prevent deposits from fleeing banks in other countries, central banks globally will be forced to provide similar depositor guarantees.
While the Fed’s new program is only slated to last a year, Hayes doesn’t believe the central bank will stand by the March 2024 cutoff date.
“Given the Fed has no stomach for the free market in which banks fail due to poor management decisions, the Fed can never remove their deposit guarantee,” he wrote. “Long Live BTFP.”
How Bitcoin Moons
Money printing is typically viewed as bullish for all financial assets, including Bitcoin, which experienced a historic rally from March 2020 to November 2021 while the Fed’s benchmark rate was at just 0.25. BTFP, according to Hayes, “ushers in infinite money printing,” which means Bitcoin will rise again.
It will be a hated rally, however: the media, he argued, will attempt to blame the banking fallout on the crypto industry, and be confounded by how Bitcoin continues to soar despite the carnage in the mainstream financial world.
Some politicians have even claimed that the government’s closing of the crypto-friendly Signature Bank earlier this month was intended to send a “strong anti-crypto message,” rather than to protect depositors.
“Instead, what crypto did was once again demonstrate that it is the smoke alarm for the rancid, profligate, fiat-driven Western financial system,” wrote Hayes.
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Elon Musk Mocks Jim Cramer’s Market Advice
Twitter’s owner and one of the wealthiest people on the planet – Elon Musk – dropped a sarcastic tweet regarding Jim Cramer’s recent market predictions.
The host of CNBC’s financial TV show – “Mad Money” – has given guidance to investors numerous times, but often that advice has turned wrong. A few days ago, he argued that people should use the recent crypto price rally as an opportunity to sell their stash. However, the market kept its uptrend, with bitcoin tapping a new 9-month high at $27,000 earlier today.
‘Inverse Cramer’ ETF Seems to be Working
In a recent Twitter post, the Co-Creator of the memecoin Dogecoin – Billy Markus (better known as Shibetoshi Nakamoto) – said Cramer is “good at his job.” His comment started a debate, and one of the people to join was Elon Musk.
The South African entrepreneur ironically supported the “Inverse Cramer” strategy – a plan that helps investors bet against the stock picks of “Mad Money’s” host.
The Force is strong with inverse Cramer
— Elon Musk (@elonmusk) March 16, 2023
The Inverse Cramer Tracker ETF (ticker SJIM) was designed to perform in the opposite direction of the TV personality’s advice. Matthew Tuttle – CEO of Tuttle Capital Management – explained in detail:
“If he specifically says either buy, buy, buy a stock, then we’re gonna go short that stock at the next practical moment. If he tells you he hates a stock or sell, sell, sell or something like that, then we’re gonna go long that name again at the next kind of practical entry point.”
Some cryptocurrency participants have recently claimed that betting against Cramer could be an appropriate investment strategy since his predictions on the future performance of digital currencies, such as bitcoin, have not been quite precise.
Examples of his Failures
Cramer suggested at the beginning of 2022 that the correction of bitcoin and ether could be over, hinting at the start of a cryptocurrency bull run. However, last year was devastating for the industry and saw the demise of several giants, including FTX, Celsius Network, Three Arrows Capital (3AC), and more.
The negative events, the broad macroeconomic crisis, and other factors had an adverse effect on most digital assets, with BTC plunging by 65%.
The American, who was once a proponent of cryptocurrencies, advised investors to sell their “awful” positions in December 2022:
“You can’t just beat yourself up and say, ‘hey, it’s too late to sell.’ The truth is, it’s never too late to sell an awful position, and that’s what you have if you own these so-called digital assets.”
Back then, bitcoin was hovering around $17K, while currently, it sits above the $26K mark (over 50% increase).
It is worth noting that Cramer told investors to buy Silicon Valley Bank (SVB) shares at the beginning of February this year. Recall that the financial institution revealed operational difficulties, prompting regulators to close it down a month after that advice.
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Messari CEO Explains What Could Shoot up Bitcoin to $100K in a Year
Ryan Selkis – CEO of the crypto intelligence firm Messari – believes there will be more negative events in the financial world in the near future, including bank crashes.
He sees bitcoin acting as “a life raft and peaceful exit option” amid the calamity, predicting its price could soar to $100,000 in the next twelve months.
What Does the Future Hold?
In a recent tweet, Selkis shared his vision regarding the future condition of the financial world and how those possible factors could affect bitcoin.
He thinks the ongoing banking crisis is far from over, forecasting additional collapses in the following weeks. Silvergate Capital, Silicon Valley Bank, and Signature Bank are among those recently closed by regulators. SVB – one of the top 20 biggest financial institutions in the USA before its collapse – filed for Chapter 11 bankruptcy protection on March 17.
Selkis predicted that the Federal Reserve will soon stop the increase of interest rates and focus on other monetary tools, such as Quantitative Easing (QE), to battle inflation. It is yet to announce its decision on March 22 during its next FOMC meeting.
QE is another policy that central banks could enforce to reduce inflation rates. It allows them to purchase government bonds and other financial instruments, such as mortgage-backed securities (MBS), to improve stalled economic activity. Interestingly, the method is typically used when interest rates are near zero and not when they have reached record levels as the 4.75% in the USA.
Bitcoin’s Reaction
Messari’s CEO thinks all those events could propel a price surge for bitcoin, boosting it to $100,000 in the next year. He sees it as a lifeboat and a “peaceful exit option” to all the turbulence that currently shakes the financial system. According to him, reaching that milestone could become a reality once institutions join BTC’s ecosystem and are allowed to stay there:
“But the key is threading the needle so institutions can buy it and defend it alongside of us.”
Some crypto participants believe the leading digital asset has already started a bull run since its valuation climbed significantly during the banking crisis in the USA. After all, it came into existence amid another severe monetary crash – the one in 2008 – and is meant to be an alternative to the cracks of centralized financial entities.
While people’s savings stuck in institutions could be exploited due to a bank run or another adverse event, bitcoin’s decentralized nature avoids that issue (especially if the stash is stored on a cold wallet).
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Is Coinbase Moving Abroad? Firm Begins Talks to Launch Platform Overseas (Report)
Coinbase, America’s largest crypto exchange, is reportedly in talks to set up a new digital asset trading platform overseas that can offer access to global clients.
- The discussions, which remain confidential, have yet to establish a precise location for the global marketplace, three people familiar with the matter told Bloomberg.
- However, the exchange has already made contact with market makers about how to connect to it.
- “International expansion is going to continue to be a very core part of how we operate,” said Coinbase Chief Operating Officer Emilie Choi during an earnings call last month.
- The talks occur as regulators forced Silicon Valley Bank (SVB) and Signature Bank – two of the nation’s biggest crypto banking partners – to close their doors over the weekend, which some politicians are calling a deliberate attack on the industry.
- Coinbase abandoned Silvergate – another fallen crypto bank – for Signature earlier this month, though the bank’s recent closure may put it under further pressure. Some data suggests that former crypto clients of Silvergate have been retreating to Swiss banks this week.
- Coinbase has frequently remarked on the fast-increasing regulatory hostilities in the United States, and warned that poor policy and enforcement around the industry may only serve to push it overseas.
- The exchange currently serves clients in over 100 countries, but all transactions are ultimately routed through the same U.S. platform.
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Bitcoin Skyrockets 30% Weekly on the Fed’s $300B Bank Bailout: This Week’s Crypto Recap
Things change fast in the cryptocurrency industry. In the span of seven days, the market shifted completely, with the sentiment escaping the fear zone. The total capitalization also soared, adding a whopping $165 billion in the process. But what happened? Well, let’s dive in.
First things first, it’s important to note that BTC’s price is currently trading above $26K, reaching highs last seen nine months ago in June 2022. This marks a 30% increase, and it comes on the back of major macroeconomic developments in the United States.
Recall that Silicon Valley Bank – a major financial institution in the US with a substantial amount of VC money in deposits, went bust. The bank revealed a hole in its balance sheet and was unable to patch it through a share offering, scaring depositors who attempted to get their money out. In a matter of days, authorities shut it down, leaving many people worried about whether they would get their deposits at all.
The US Government, in the face of the Federal Reserve, the Treasury, and the FDIC, was quick to assemble a rescue plan, promising that all depositors will be made whole. And while they refuse to call it a bailout, many claim that it’s exactly this. US banks borrowed a whopping $300 billion as the financial markets shuddered following the failure of SVB.
In turn, this caused many investors to believe that the Federal Reserve will not hike interest rates further in an attempt to lessen the strain on the banking system. In fact, the markets are now pricing a possibility of no hike at all, compared to a week ago, when they were pricing in a 50bps hike.
This has essentially hinted to market speculators that the Fed might even pivot in their monetary policy, propelling prices of risk-on assets such as BTC (and almost all other cryptocurrencies) to the stratosphere.
There are many variables, and we have yet to see how the whole situation will play out, but for now, crypto markets are reacting incredibly positively to the news. Could it be that BTC is finally fulfilling its purpose of serving as an inflation hedge? Or is this another speculation-drive rally?
In any case, the following weeks will be particularly important and exciting, especially as the Fed is set to meet on March 22.
Market Data
Market Cap: $1175B | 24H Vol: $107B | BTC Dominance: 43.7%
BTC: $26,568 (+30.4%) | ETH: $1,725 (+20.1%) | BNB: $331 (+19.7%)
This Week’s Crypto Headlines You Better Not Miss
3 Reasons Bitcoin Exploded to a 9-Month High This Week. Bitcoin’s price increased by a whopping 30% in the past seven days. Here are three possible reasons and considerations to take into account as to why this may have happened.
What You Need to Know About the Arbitrum Airdrop. The wait is finally over. The Arbitrum airdrop is confirmed, and ARB will be distributed to eligible addresses on March 23rd. Here’s how you can check whether you qualify and how many tokens you will get.
Who Has Exposure to SVB and Signature Bank? A Closer Look. Silicon Valley Bank holds money for a lot of clients, and crypto-focused companies are absolutely no exception. In this article, we take a closer look at who has their money exposed and to what extent.
HSBC Acquires Silicon Valley Bank UK for a Pound (Report). Europe’s largest banking institution – HSBC – bought the UK branch of Silicon Valley Bank for one pound. The deal is structured to protect investors, and HSBC will inject additional liquidity into the failing bank.
European Regulators Blast Federal Reserve for SVB Depositor Bailout. European regulators are not happy with the Fed’s decision to bail failing banks out. Some have said that this is an approach of “systemic risk exception.”
US Judge Denies DOJ’s Appeal to Stay Voyager-Binance.US $1B Deal. Despite the attempts of the US Government to halt the deal between Binance US and Voyager, the judge overseeing the case has once again denied the DOJ’s appeal. He said this would harm Voyager’s customers who are waiting to receive their funds.
Charts
This week we have a chart analysis of Ethereum, Ripple, Cardano, Binance Coin, and Polkadot – click here for the complete price analysis.
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Crypto Price Analysis Mar-17: ETH, XRP, ADA, BNB, DOT
This week, we take a closer look at Ethereum, Ripple, Cardano, Binance Coin, and Polkadot.
Ethereum (ETH)
This week, the market sentiment completely shifted, with bulls taking full control of the price action. ETH rallied by 21%, making it the best performer on our list. This spectacular rally allowed it to break above the key resistance at $1,660, which has now turned into support.
With the uptrend in full swing, this cryptocurrency can reach $2,000, which is a key psychological level. The momentum indicators are bullish, and there is no sign of exhaustion yet.
Looking ahead, it seems likely that ETH could move higher and test the key resistance levels found at $1,800 and $2,000. Sellers already paid an expensive price trying to short the market, and for this reason, they are absent at this time.
Ripple (XRP)
While most of the market is rallying, XRP appears to be lagging behind, registering only a 1% increase this past week. This is rather surprising, considering the bullish sentiment across the board.
As XRP is a momentum coin, it could be that its price will catch up at a later time when money will rotate from altcoins that are currently registering significant moves. The key resistance is found at 40 cents, and the support was well defended to date, at just above 34 cents.
Looking ahead, XRP appears to be trending between the key levels without any significant breakout.
Cardano (ADA)
Cardano’s downtrend came to an abrupt stop this week and registered a 10% price increase. This is a significant change in the price action that was bearish a week ago.
With buyers on the offensive, it seems that the key resistance at 35 cents may not hold the price down for long, and a breakout can be expected in the coming days. The current support is found at 30 cents.
Looking ahead, ADA is turning bullish and may soon attempt to break the key resistance, which could open the way toward 38 cents next. Should that be successful, then the most significant level on the chart will be the key resistance at 42 cents.
Binance Coin (BNB)
After Binance announced its intention to buy BNB using its industry recovery fund worth $1 billion, the price did not waste one minute and started rallying, booking a 20% increase this week. This momentum only intensified as the week progressed.
At the time of this writing, Binance Coin is found just under the key resistance at $346. The last time it visited this level, its price was sharply rejected. However, a second attempt may turn this level into support and open the way to a higher valuation.
Looking ahead, the outlook on BNB is bullish, and this latest news from Binance has placed sellers on the run as they are nowhere to be found.
Polkadot (DOT)
During the past week, DOT found good support at just over $5, and since then, the price increased by 20%. This momentum is expected to continue, and the price could reach the key resistance at $7.5 next.
With a clear higher low on the three-day timeframe, it could be that Polkadot is now entering the third impulse up in a five-wave Elliot structure. If so, buyers will likely be in full control of the price until the key resistance.
Looking ahead, DOT has a good chance to recover some of its losses from this bear market and re-enter a two-digit valuation this year.
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