SVB Ventures | Newsletter No. 18

🔸 Macro News

✔ Fed cuts interest rates by 25bps in November

After the meeting on November 7, the Federal Reserve’s Federal Open Market Committee (FOMC) decided to cut interest rates by 25 basis points, lowering the rate from 4.75% to 4.5%. Despite this announcement, the cryptocurrency and stock markets remained largely unchanged, possibly because investors had already priced in this rate cut.

Fed Chairman Jerome Powell stated that the economy is maintaining steady expansion, although the outlook remains uncertain. He noted that the labor market has shown signs of easing, with a slight increase in the unemployment rate, but it remains low.

Regarding inflation, Powell reaffirmed that the Fed's 2% inflation target remains a priority, although current inflation levels are still high. Future interest rate decisions will depend on incoming economic data and growth prospects, balancing risks to employment and inflation. However, he also remarked that "one or two months" of adverse data would not alter the Fed’s interest rate decisions.

✔ Elon Musk and Vivek Ramaswamy will lead new ‘Department of Government Efficiency’ - DOGE in Trump administration

President-elect Donald Trump has announced his decision to appoint CEO of Tesla, Elon Musk, and co-founder of Strive Enterprises, Vivek Ramaswamy, to lead the new Department of Government Efficiency (DOGE). This move aims to dismantle the bureaucratic machinery of government, cut unnecessary regulations, eliminate wasteful spending, and restructure federal agencies.

The new department will play a guiding role in driving large-scale structural reforms from outside the United States government and will apply a "start-up approach" never seen before when working with the White House and the Office of Management and Budget.

✔ SEC Chair Gary Gensler has officially announced his resignation

Gary Gensler, Chairman of the US Securities and Exchange Commission (SEC), will leave the agency on January 20, 2025. His departure coincides with the start of President-elect Donald Trump's second term. Gensler has taken a strict approach to cryptocurrency regulation, with over 100 legal actions against companies in the industry.

Gensler's replacement is still unknown, but potential candidates include Dan Gallagher and Brian Brooks. Brooks is currently the top contender, with a 48% chance of being chosen. Trump has promised to replace Gensler with someone more friendly to the industry.

✔ Trump Considering New White House Crypto Advisor Position

President-elect Donald Trump is reportedly considering establishing a crypto advisor position within the White House, and his team is currently interviewing potential candidates, though no prominent contenders have been publicly revealed.

According to a report from Bloomberg, Trump and his team are planning to introduce this inaugural cryptocurrency-focused role in the White House. He is said to be engaging in discussions with industry leaders to identify suitable candidates. One name frequently mentioned is Brian Brooks, the former head of Binance.US.

With a dedicated crypto advisor in the White House, a Trump administration could potentially push for crypto-friendly regulations.  During his campaign, Trump pledged to implement major reforms to the existing US cryptocurrency policy.  His key initiatives reportedly include blocking anti-crypto moves in Congress, appointing industry allies to lead financial regulatory bodies, and establishing a Bitcoin reserve fund.

✔ Trump Picks Pro-Crypto Hedge Fund Manager Scott Bessent for Treasury Secretary 

President-elect Donald Trump has nominated Scott Bessent, a hedge fund manager and cryptocurrency enthusiast, as a candidate for Secretary of the Treasury. If approved, Bessent would be a strong supporter of the cryptocurrency ecosystem, potentially shaping the future of finance. Born in 1962, Bessent is a prominent investor and founder of Key Square Capital Management, with a background in teaching economic history at Yale University.

In a July interview with Fox Business, Bessent expressed excitement about Trump's acceptance of crypto, stating that it represents freedom and is here to stay. As a pro-crypto individual, Bessent's potential appointment could have significant implications for the future of cryptocurrency and its integration into traditional finance.

✔ Trump to Meet Privately With Coinbase CEO Brian Armstrong

Brian Armstrong, CEO of US-based cryptocurrency exchange Coinbase, is expected to meet with President-elect Donald Trump as Trump continues to announce his picks for his administration and government department heads.

According to a report by the Wall Street Journal on November 18, Trump plans to meet with Armstrong privately to discuss personnel appointments. Although Armstrong did not directly contribute to the Republican Party's 2024 campaign or directly support Trump through political action committees (PACs), he has stated that Coinbase is willing to cooperate with Trump's administration.

It is unclear at this time whether Armstrong or any Coinbase employees will be appointed to a role in the incoming US presidential administration.

🔸 Bitcoin

✔ MicroStrategy plans to raise $42 billion over the next three years to buy more Bitcoin.

MicroStrategy, led by Michael Saylor, plans to raise $42 billion over the next three years to bolster its Bitcoin reserves. Announced on October 30, the "21/21 plan" includes $21 billion from equity and $21 billion from fixed-income securities. At current prices, this amount could buy 578,586 BTC, about 2.7% of Bitcoin's total supply. CEO Phong Le stated that the move aims to optimize returns from Bitcoin holdings, with the company's current BTC yield at 17.8% and a target annual yield of 6% to 10% from 2025 to 2027.

Crypto commentator BitcoinMiningStockGuy highlighted the significance of the $21 billion, equivalent to the total market cap of all public miners combined. Quantum volatility researcher Ryan McGinnis noted that this plan suggests "escape velocity" for MicroStrategy, potentially widening the gap between it and other public companies worldwide. This initiative follows MicroStrategy's recent $1.01 billion convertible bond offering in September, with proceeds partly allocated to Bitcoin purchases.

✔ Chinese publicly traded company SOS unveils plans to invest $50M in #Bitcoin, betting on its future as a strategic global asset.

China's SOS Limited announced plans to invest up to $50 million in Bitcoin, reflecting the company's long-term confidence in the cryptocurrency as a strategic asset and global value store, according to CEO Yandai Wang. This move aligns with a broader trend where companies like Singapore's Genius Group and Tokyo's Metaplanet are also building their Bitcoin reserves, joining the likes of MicroStrategy, which has invested over $21 billion in Bitcoin since 2020.

Shares in the China-based financial services conglomerate SOS Ltd jumped over 40% after it pledged to buy $50 million worth of Bitcoin, the latest in a string of firms to buy up the rallying cryptocurrency.

This corporate interest in Bitcoin coincides with potential US government moves towards a strategic Bitcoin reserve. These developments highlight Bitcoin's increasing acceptance as a legitimate asset for both corporations and nations, fueled by favorable regulations and the emergence of Bitcoin ETFs.

✔ Pennsylvania introduces bill to use $7 billion state fund for Bitcoin Strategic Reserve purchases

Pennsylvania's legislature is considering a bill, spearheaded by Representative Mike Cabell, that would establish a state Bitcoin reserve as a hedge against inflation.  This groundbreaking proposal, which has already passed the House, allows for a portion of state reserves to be allocated to Bitcoin, potentially up to 10%, though 1% to 5% is considered more likely.

The initiative, supported by both parties and aligned with Governor Shapiro's economic plans, could position Pennsylvania as a leader in digital asset policy and serve as a model for other states. If enacted, it would mark a significant shift in state-level financial management and influence broader US fiscal policy.

✔ Brazil introduces Bitcoin Strategic Reserve Bill

Brazilian Federal Deputy Eros Biondini has proposed a bill to establish a national Bitcoin reserve, RESBit, holding up to 5% of the country's international reserves. Managed by the Central Bank and Ministry of Finance, RESBit aims to diversify assets, support Brazil's CBDC (Drex), and leverage the growing cryptocurrency market, which surpassed $3 trillion in 2021.

The bill emphasizes security through cold wallets and advanced monitoring, alongside public education on digital assets. RESBit's management would follow Brazil's Fiscal Responsibility Law, with a gradual and controlled Bitcoin acquisition process, positioning Brazil as a leader in the digital economy while mitigating associated risks.

✔ As bitcoin treasury adoption grows, analysts say smaller-cap companies would be better served to follow MicroStrategy's lead

MicroStrategy's significant Bitcoin accumulation has boosted its stock price and market cap, leading other companies to consider similar strategies. While MicroStrategy has a head start, analysts believe its success makes a Bitcoin treasury strategy more acceptable for other publicly traded companies, with some, like Metaplanet, Semler Scientific, and Rumble, already following suit.  Even Microsoft is considering an assessment of investing in Bitcoin, though analysts consider it unlikely they will fully adopt MicroStrategy's approach.

While mega-cap tech companies have the cash to invest in Bitcoin, analysts suggest it would likely be a non-material part of their strategy due to the dominance of their core businesses. Smaller companies with surplus cash and weakening core businesses might be more inclined to follow MicroStrategy's model. However, MicroStrategy's four-year track record, including surviving a bear market, gives it a significant advantage.  Experts anticipate measured exploration of Bitcoin by large caps rather than wholesale adoption, as exemplified by the approach of companies like Rumble.

🔸 Ethereum

✔ Demand for leveraged Ether ETFs has soared by 160% post-Trump's win, signaling a possible Ether price surge to $4,000.

Investor interest in leveraged Ether trading products has surged, with the VolatilityShares 2x Ether ETF seeing a 160% increase in ETH equivalent exposure since November 5, indicating strong market momentum that could push Ether past the $4,000 mark. This uptick in leveraged positions coincides with positive inflows into Ether ETFs and a broader market trend of spot buying, suggesting a sustained rally for Ether, potentially fueled by Bitcoin's stabilization below $100,000, which could redirect investment into Ether and other altcoins.

The recent market dynamics, including a record influx of stablecoins to exchanges and technical indicators like a three-year cup-and-handle pattern on ETH/USD charts, support predictions of Ether reaching new highs, with some analysts forecasting a climb to $20,000 in the next bull cycle. This optimism is further bolstered by the political climate, with the recent U.S. election results boosting investor confidence in risk assets like cryptocurrencies.

🔸 ETF

✔ Grayscale to launch options trading on its #Bitcoin ETFs today, following BlackRock's record-breaking debut.

Crypto asset manager Grayscale Investments plans to launch options trading for its spot Bitcoin ETF trusts on Wednesday amidst investor anticipation of strong demand for these products.

The announcement comes a day after BlackRock’s iShares Bitcoin Trust (IBIT) saw record-breaking activity in its options trading debut, pushing Bitcoin to new highs.

Grayscale stated it will roll out options trading on GBTC (Grayscale Bitcoin Trust) and BTC (Bitcoin Mini Trust) to “further develop the ecosystem around U.S.-listed Bitcoin ETPs.”

✔ The SEC is Engaging with Firms Registering for Solana ETFs

On November 21st, the Cboe BZX Exchange filed four 19b-4 forms to list spot Solana ETFs from Bitwise, VanEck, 21Shares, and Canary Capital, coinciding with Bitwise's registration of a Delaware trust for a spot Solana ETF and the announcement of SEC Chair Gary Gensler's resignation.  These filings signal a potential shift towards a more crypto-friendly regulatory environment, especially with anticipated new SEC leadership.

While analysts expect inflows into Solana ETFs to be smaller than those for Bitcoin and Ether, Solana's significant price increase of over 2,500% this cycle highlights its potential. This wave of ETF filings, including those for XRP and Litecoin, along with Franklin Templeton's crypto index ETF, underscores growing institutional interest in cryptocurrencies beyond Bitcoin and Ethereum.

✔ Crypto funds add another $2.2 billion in a week as YTD inflows and AUM hit record levels

Global crypto funds, including those from major asset managers like BlackRock and Fidelity, saw a record-breaking sixth consecutive week of net inflows, totaling $2.19 billion, pushing the year-to-date total to an unprecedented $33.5 billion. This surge coincided with Bitcoin reaching new all-time highs above $93,000, boosting the assets under management to a peak of $138 billion, influenced by looser monetary policies and the recent U.S. election outcomes, according to CoinShares.

Bitcoin products were the primary beneficiaries, attracting $1.48 billion in net inflows, although the peak also led to $49 million being invested in short-bitcoin products. Ethereum products also reversed their trend of outflows, with a significant $646 million in net inflows, possibly spurred by developments like Justin Drake's Beam Chain proposal and the U.S. elections, with U.S. spot Ethereum ETFs alone seeing $515.3 million in inflows, the highest since their inception.

✔ Bloomberg analyst says altcoin ETFs will ignite a ‘wild’ crypto market in 2025

Bloomberg analyst Eric Balchunas predicts a dynamic crypto market with the potential approval of 14 pending altcoin ETFs, covering assets like Solana, XRP, and Litecoin, along with combined Bitcoin and Ethereum funds. He anticipates a tripling of altcoin ETFs in the coming months.

The favorable market outlook following the US election has further fueled optimism, with ETF Store CEO Nate Geraci predicting multiple spot crypto ETF listings. Recent filings by Canary Capital, Bitwise, and NYSE for new ETFs, including a Hedera ETF and a Solana trust, reflect this growing momentum.  While the SEC's stance remains unclear, analysts believe certain ETFs, like the Litecoin ETF, have a strong chance of approval.

✔ Bitcoin ETFs could overtake gold ETFs in size within one month

US Bitcoin ETFs are quickly approaching the size of gold ETFs, with Bloomberg analyst Eric Balchunas predicting they could surpass them by Christmas. As of November 23, Bitcoin ETFs in the US reached $107 billion, about 86% of gold ETFs' total assets. Recent net inflows of $3.3 billion have further boosted Bitcoin ETFs, with BlackRock’s iShares Bitcoin Trust leading the way.

Despite Bitcoin’s surge to a new high of $99,500, concerns about its stability persist. VanEck forecasts Bitcoin reaching $180,000 this cycle, but State Street's chief gold strategist George Milling-Stanley warns that Bitcoin's appeal is based on returns rather than the long-term stability gold offers. While gold has gained 30% year-to-date, Bitcoin has soared 160%, now surpassing the market cap of silver and Saudi Aramco.

🔸 Crypto Policies & Regulations 

✔ Prime Minister Pham Minh Chinh signals that it is time to regulate Bitcoin in Vietnam.

On November 23, Vietnam's government submitted the Digital Technology Industry Draft Law to the National Assembly, including a crucial chapter on digital assets and encrypted assets. This marks the first time the concept of digital assets has been introduced into Vietnam's legal system, signifying a pivotal step in establishing a regulatory framework for modern digital technologies like blockchain. The draft defines digital assets as intangible assets represented by digital data, created, issued, and stored through digital technology in an electronic environment.

The draft also proposes clear criteria for managing digital assets, ensuring integrity, transparency, and legitimate origin, enabling secure electronic transactions. This not only reassures asset owners but also lays a legal foundation for developing digital technology applications, particularly in finance and e-commerce. The draft addresses issues such as taxation, consumer protection, cybersecurity, and anti-money laundering, reflecting the government's efforts to mitigate potential risks from virtual assets while supporting a more transparent and secure digital asset market.

✔ UK to introduce comprehensive crypto regulations in 2025 as global competition heats up

The UK plans to introduce a comprehensive crypto regulatory framework in early 2025, focusing on stablecoins, staking, and other digital asset services.  This framework will adapt existing regulations to the unique nature of cryptocurrencies, aiming to improve guidelines for stablecoins and reclassify staking to encourage innovation.

By aligning with industry needs and learning from the EU's MiCA framework, as well as anticipating potential pro-crypto policies in the US, the UK aims to attract investment, foster growth, and become a global leader in crypto regulation, balancing innovation with consumer protection.

✔ Brazil’s Congress to weigh Bitcoin Reserve as hedge against global risks

Brazilian Congressman Eros Biondini has introduced a bill to create a federal Bitcoin reserve, RESBit, holding up to 5% of the nation's financial reserves. This reserve aims to protect against currency volatility and geopolitical risks, while also supporting Brazil's upcoming digital currency, Real Digital.  The reserve would be managed by the central bank using blockchain and AI.

Inspired by El Salvador's Bitcoin adoption, the bill includes penalties for mismanagement and builds upon Brazil's existing legal framework for virtual asset service providers. If passed, it would further solidify Brazil's position in regulating and utilizing digital assets.

✔ Hong Kong proposes tax breaks to attract crypto hedge funds, investors

Hong Kong aims to become a leading crypto hub by proposing tax exemptions on cryptocurrency gains for hedge funds, private equity, and family investment vehicles. This initiative, open for a six-week consultation, also covers private credit, overseas property, and carbon credits, and is designed to rival financial centers like Singapore and Switzerland.

By easing tax burdens on digital and alternative assets, Hong Kong hopes to attract global liquidity and strengthen its digital economy. Analysts believe this move could solidify Hong Kong as an offshore financial center and boost the Asian crypto market. The proposal follows ZA Bank's recent launch of a retail crypto trading service, further demonstrating Hong Kong's commitment to the crypto industry.

✔  Pakistan moves to regulate cryptocurrency, CBDCs as legal tender

The State Bank of Pakistan (SBP) has proposed legalizing digital assets, potentially paving the way for cryptocurrencies to become legal tender and the issuance of a central bank digital currency (CBDC), like a digital rupee. This move aims to regulate the digital asset market and could boost the nation's economy.

Concurrently, the Monetary Policy Committee (MPC) reduced interest rates by 2.5% due to improved economic indicators, including lower inflation and a positive GDP growth forecast for 2025.  These combined actions suggest a forward-looking approach to Pakistan's financial landscape.

✔ Singapore Advances Tokenization of Assets With New Frameworks

The Monetary Authority of Singapore (MAS) has introduced two new frameworks to promote tokenized fixed income assets and funds. The "Guardian Fixed Income Framework" guides tokenizing debt markets, enhancing transparency, efficiency, and settlement times. The "Guardian Funds Framework" provides best practices for tokenized funds, including a taxonomy for developing various tokenized investment vehicles.

Since 2022, Singapore's MAS has overseen over 15 trials involving 40+ financial institutions and policymakers across seven jurisdictions through Project Guardian.  Major banks like Citi, HSBC, and Standard Chartered formed a network to scale asset tokenization, an area seeing significant interest, particularly in fixed income, forex, and asset management. MAS is supporting the commercialization of these tokenization initiatives.

✔ Putin signs law recognizing digital currencies as property, exempting crypto mining and sales from VAT

Russia has legalized digital currencies for foreign trade settlements and exempted crypto mining and sales from VAT under a new experimental framework. However, the law imposes taxes on mining and trading income, including a tiered personal income tax and a 25% corporate tax on mining profits starting in 2025.

Effective immediately, this law further integrates crypto into Russia's legal system while increasing regulatory oversight. It restricts crypto businesses from certain tax benefits and mandates reporting requirements for mining operators, demonstrating a move towards greater control over the cryptocurrency sector.

✔ Morocco legalizes crypto after a 7-year ban

Morocco is lifting its 2017 cryptocurrency ban and drafting a law to regulate crypto assets, while also exploring a central bank digital currency (CBDC) for financial inclusion. This reflects a global trend, with 134 countries now exploring CBDCs.

The initial ban stemmed from concerns about illicit activities and the volatile nature of cryptocurrencies. However, continued underground crypto activity in Morocco underscores the need for a regulated framework, aligning the country with the growing global interest in digital assets.

✔ China declares Bitcoin as property

China's High Court has recognized cryptocurrencies as commodities with limited legal use, but maintains a strict ban on token fundraising and business transactions involving crypto. This decision aligns with China's selective support for blockchain technology in specific areas like cross-border payments and its use of the digital yuan in international trade.

Despite some internal advocacy for broader blockchain adoption, China remains cautious, concerned about the risks associated with widespread crypto use.  While Hong Kong has approved a Bitcoin ETF, mainland China continues to heavily regulate the crypto industry, leading to global discussions about its position in the evolving digital asset landscape.

🔸 Other News

✔ Tether just minted $1B $USDT on Ethereum, bringing the total to $16B this month.

✔ DWF Labs Launches $20 Million Fund to Support Memecoin Projects

Dubai-based Web3 investor DWF Labs has launched a $20 million fund to support memecoin projects, aiming to foster community-driven creativity and increase awareness in the crypto space. The fund will provide financial and strategic support to promising projects with strong communities and global potential, regardless of their blockchain platform.

According to DWF Labs' managing partner Andrei Grachev, the fund reflects the firm's belief in memecoins as a "powerful cultural force."  DWF Labs, already partnered with several successful memecoins, is currently accepting applications from projects seeking investment and guidance through their website.

✔ Aave's lending volume has increased by 3 times since the beginning of the year, surpassing $10 billion

Aave, a leading DeFi lending platform, has experienced significant growth in the past 30 days. Active loans have increased by 16.4% to $10.04 billion, while the total value locked (TVL) has risen by 26.7% to $15.96 billion. This growth has driven a 48% increase in transaction fees, leading to an 82% surge in monthly revenue, and boosting Aave's income by a staggering 1,628%.

The platform has also seen a 40% increase in daily active users, now exceeding 6,200, contributing to a slight rise in Aave token holders, now nearing 173,000. Aave founder Stani Kulechov attributes this surge to a broader "renaissance" within the DeFi ecosystem.

✔  Base sees record 106 TPS as total value locked crosses $10B

Ethereum layer-2 network Base has achieved a new record of 106.26 transactions per second (TPS), significantly outpacing its previous performance and other layer-2 solutions, with its total value locked (TVL) recently exceeding $10 billion. This marks a substantial increase from its average of 4 TPS in January, positioning Base as the second-largest Ethereum layer-2 by TVL, just behind Arbitrum One.

The surge in Base's TPS coincides with efforts by Ethereum layer-2 networks to compete with fast blockchains like Solana, with competitors like Starknet planning to dramatically increase their transaction speeds. Despite its growth, Base has faced challenges with an increase in phishing scams, but it continues to advance its technology, implementing fault proofs to move towards greater decentralization.

✔ Binance experiences strong outflow forcing it to use cold wallet reserve funds to respond

Binance, a leading centralized exchange, is experiencing a large wave of withdrawals, forcing it to use reserve funds from its cold wallets. Despite this, Binance holds a large amount of Bitcoin, with 248,597.53 BTC (worth $22.93 billion) in one address and a total of 738,349.58 BTC across various addresses.

This situation highlights the importance of cold storage in maintaining liquidity during high withdrawal periods and the significant responsibility that exchanges like Binance and Coinbase carry in safeguarding vast amounts of digital assets.

✔ Binance Under Fire for Allegedly Listing Pump-and-dump Memecoin Schemes

Binance's recent listings of Solana-based memecoins like ACT and PNUT have drawn criticism, with accusations of promoting pump-and-dump schemes. Following their listings, both tokens experienced significant price surges, fueling concerns about insider advantages and a lack of transparency in Binance's listing process.

This shift in Binance's listing strategy has sparked a debate on the ethics of listing such volatile assets. On-chain data reveals that most memecoins listed by Binance in 2024, primarily on Solana, have seen substantial price increases after listing, raising questions about the exchange's motivations and selection criteria.

✔  Tether CEO Projects Liquidity Pool for Commodities Financing to Reach $5 Billion by 2026

Tether CEO Paolo Ardoino forecasts the company's liquidity pool for raw materials transactions to reach $3-$5 billion by 2026. Tether Investments recently financed a $45 million oil trade, marking its expansion into the $10 trillion trade finance industry, where it plans to lend capital to commodities traders.

Leveraging its substantial profits, Tether aims to invest over $1 billion in the next year, diversifying into traditional finance. By integrating its USDT stablecoin into commodities trading, Tether seeks to improve efficiency and transparency, positioning itself as a major player in both the crypto and traditional finance sectors.

✔ New Global Dollar Stablecoin Backed by Robinhood, Kraken, Paxos and Other Crypto Heavies

Major crypto firms, including Anchorage Digital, Bullish, Galaxy Digital, and others, are backing a new compliance-focused stablecoin called Global Dollar (USDG). Issued by Paxos in Singapore, USDG differentiates itself by distributing approximately 97% of its reserve asset returns to participants, unlike competitors like Tether and Circle.

USDG's reserve profits, primarily from U.S. Treasury bonds, are shared based on participants' contributions to the network's liquidity, rewarding those who enhance its value. The stablecoin will be available in the U.S. through partners like Anchorage, with DBS Bank handling cash and custody reserves.

✔ Europe’s Coinbase users frustrated as MiCA forces sunset of USDC yield

Coinbase is ending its USDC yield program in Europe due to the EU's MiCA regulations, which prohibit offering interest on stablecoins. This move has angered users who feel the regulations are overly restrictive and prevent them from earning yield, highlighting a broader dissatisfaction with MiCA's impact on the European crypto market.

While Tether is withdrawing its euro-pegged stablecoin due to the regulatory environment, some new players are still entering the market, indicating ongoing tension between regulation and innovation in the European crypto space.  The situation underscores the debate over whether regulations like MiCA are ultimately beneficial or detrimental to consumers and the industry as a whole.