Appold Market Watch - Week ending 30 August 2024
Market Update & Industry News - Week ending 30 August 2024
🔷 Payment giant, PayPal, announced that its U.S. dollar-backed stablecoin, PYUSD, has hit a $1 billion market cap, fuelled by increased activity on the Solana blockchain. This significant milestone was reached following PYUSD's expansion beyond Ethereum, with Solana's generally faster and cheaper transactions.
Appold view: This highlights the growing acceptance of stablecoin usage and adds competitive pressure to the current major issuers, Tether.io (USDT) and Circle (USDC). Currently, there appears to be no formal confirmation as to whether PayPal will add additional blockchains in the near future.
🔷 Non-fungible token (NFT) marketplace, OpenSea, was issued a Wells Notice from the U.S. Securities and Exchange Commission (SEC) alleging that NFTs are securities and should have been regulated appropriately. In 2023, the regulator prosecuted two NFT projects, and both led to settlements with the SEC.
Appold view: A Wells Notice is a formal notification in which the SEC has made a preliminary determination to recommend enforcement against them. OpenSea is one of the largest facilitators of NFT transactions, allowing users to buy and sell NFTs using crypto (primarily Ethereum). It doesn't function as a centralised exchange for trading cryptocurrencies or other financial instruments. This should be interesting to observe.
🔷 Nasdaq requested approval from the U.S. Securities and Exchange Commission (SEC) to introduce Bitcoin index options. The proposed Nasdaq Bitcoin Index Options (XBTX) will enable institutional investors and traders to hedge risks or expand their buying power in the Bitcoin market.
Appold view: It’s interesting that Nasdaq isn’t listing a Futures contract on the Index but just Options contracts, whereas its competitor, CME Group, lists both Bitcoin Futures and Options. The Options will be launched in partnership with Kraken Digital Asset Exchange-owned CF Benchmarks. Note that CF Benchmarks also partners with the CME Group to calculate the CME CF Bitcoin Reference Rate.
🔷 A Freedom of Information request by law firm Reed Smith LLP revealed that applications to the Financial Conduct Authority (FCA) for digital asset exchange or custodian wallet provider registration fell by 51% over the past three years. Between May 2023 and April 2024, only 29 applications were received, compared with 42 and 59 in the two years prior.
Appold view: Several factors could contribute to this, including the length and complexity of the approval process by the FCA. The slow pace is discouraging and risks the UK’s ambition of being a global hub for digital assets. Alternatively, the FCA’s requirements are more precise, and although there are fewer applicants, the quality and standard of those firms could be significantly higher than in previous years.
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