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Welcome to the On the Margin Newsletter, brought to you by Ben Strack, Casey Wagner, and Felix Jauvin. Here’s what you’ll find in today’s edition:
- Felix breaks down possible catalysts for a big run in crypto prices.
- Tokenized funds continue to launch. Here are the latest to hit the market.
- Why fund issuers looking to debut more US crypto ETFs will likely need patience.
What if the bull market in crypto has yet to begin?
Real interest rates, often overlooked, can provide valuable insights into the driving forces behind different asset classes. By considering the market rate of interest minus the market rate of inflation, investors can gauge the true performance drivers. Metrics such as market-implied breakeven rates and interest rate swaps offer a forward-looking perspective akin to nominal interest rates.
The correlation between real rates and the price of gold has been historically negative, reflective of the US dollar’s value diminishing as real rates decrease. Interestingly, gold has also shown a positive correlation with increasing real rates in recent times, indicating a shift in traditional patterns.
Similarly, bitcoin has demonstrated resilience in the face of rising real rates, diverging from ultra-risky tech stocks like ARKK. This trend suggests that BTC may be trading more in line with gold than with high-risk equities. As the Fed embarks on a rate-cutting cycle, lower real rates are expected to boost returns for both bitcoin and gold.
Additional Insight:
Considering the evolving behaviors of gold, bitcoin, and tech stocks in response to real interest rates can provide investors with valuable clues about market dynamics and potential investment strategies.
In looking at the performances of gold and BTC through the lens of real rates and where they’re destined to go from here, a simple question emerges: What if the real bull market has yet to begin?
— Felix Jauvin
$50 million
The size of the loan crypto lender Ledn has secured from Swiss crypto banking group Sygnum. The syndicated loan is backed by bitcoin, the companies said Tuesday.
Ledn says it will use the capital to expand its retail lending offerings, which have interest rates starting at 11.4%.
Tokenization is all the rage
Tokenization is gaining momentum in the market, offering investors access to private equity offerings with lower minimum investment requirements. Hamilton Lane recently launched a tokenized fund on the Polygon blockchain, providing qualified investors with exposure to Secondary Fund VI at a fraction of the usual minimum investment.
With tokenized funds like Secondary PE funds and Crypto Carry Fund entering the market, the tokenization trend is expected to grow further. Analysts predict that tokenized market capitalization across all asset classes may reach $2 trillion by 2030, highlighting the potential for significant growth in this space.
Additional Insight:
The emergence of tokenized funds and the growing demand from investors indicate a shift towards digitization and tokenization of traditional assets, presenting opportunities for both investors and asset managers.
The next planned US crypto ETFs are in limbo
The SEC’s cautious approach to approving the next wave of US crypto ETFs has delayed the introduction of solana ETFs and multi-asset products. While some funds looking to hold both BTC and ETH may have a better chance at approval, the SEC is taking its time to review these proposals.
Delays in approving novel ETF structures like the crypto index ETF may stem from the SEC’s need for clarity and additional information from issuers. The potential inclusion of additional crypto assets in these ETFs could lead to further discussions and regulatory scrutiny.
Despite regulatory challenges, the demand for diversified ETFs that offer exposure to multiple crypto assets remains strong. Investors seeking to reduce risk are particularly attracted to the idea of holding a basket of digital assets.
Additional Insight:
Regulatory hurdles in introducing innovative ETF products underscore the need for collaboration between issuers and regulators to navigate the evolving landscape of crypto investments.
— Ben Strack
Bulletin Board
- State Street partners with crypto infrastructure provider Taurus to streamline digital asset issuance and servicing, signaling further adoption of digital assets in traditional finance.
- Bitcoin’s price fluctuates around $59,300, while ETH trades at approximately $2,590, reflecting ongoing volatility in the cryptocurrency market.
- Former President Donald Trump benefits from secondary NFT sales and token taxes paid by unofficial memecoins, highlighting the intersection of politics and crypto.
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