StoneX Digital Asset Weekly Commentary - NEAR VC Summit and TokenFuture

NEAR Future: Unpacking TokenFuture 2024 and VC Virtual Summit

• David Kroger
• Senior Vice President
• StoneX Digital

• david.kroger@stonex.com

Executive Summary

• Market trading color: BTC/ETH market action, implied vols, altcoin activity
• Theme of the week – NEAR VC Summit and TokenFuture 2024 showcase tokenization's impact, global regulations, DeFi innovations, and market trends
• Sector commentary: Bitcoin and Ethereum's volatility, regulatory shifts, tokenization growth, and advancements in DeFi and NFTs

Market Trading Color (Nolan Aibel)

If you were on crypto twitter over this past week, you would have thought $BTC was back at 2022 lows of $15,000. Sentiment has been terrible. However, price action tells a different story. $BTC is down less than 2.50% on the week at time of writing and continues to hover near previous all-time highs. Yes, the commodity has failed a few times to break through $72,000 but it has found and held firm around short-term holder’s realized price of $64,000 (seen on chart below). Funding is also at lowest levels seen in 3 months. $ETH price action has told a similar, positive, story finally finding a bid, and outperforming $BTC, up over 3.00% on the week. ETHBTC ratio continues to turn it around and after a week that has seen the ratio increase 4.30% to 0.05441, is up nearly 1.00% on the year. Nearly a month ago on May 15th, this ratio was at a 3 year low of 0.04529 and had been down 16.06% year to date. We continue to believe the asset has plenty of room to run given S-1 ETH ETF approvals are projected to be right around the corner, slated for early July. It also helped on Tuesday that the SEC closed their probe into $ETH 2.0, meaning that the SEC will likely not bring charges alleging that sales of ETH are securities transactions. Look out for more from our team on ETH as we will be releasing our first deep dive on the asset, hitting inboxes early next week.  

Source: Glassnode

We noted back in April that ETH 3m implied looked underpriced compared to BTC. We can now see that having played out as 3 months with the divergence seen below. ETH implied at 65.03 vs BTC 47.76. 

Source: TheTie

Circling back to the beginning of the note, sentiment on crypto twitter is down significantly due to the large majority of crypto native traders being long alt coins. When looking at the chart below showing Crypto Total Market Cap excluding the top 10 tokens, combined market value of the other tokens has fallen over 22.00% this past month alone. Many of these tokens are down >50%. BTC dominance has ticked up to 55.45% during that timeframe. Whether or not alts rally once the ETH ETFs are finally trading is yet to be seen. BTC dominance could continue to tick higher until then. 

Source: TradingView

NEAR VC Virtual Summit

Our team recently attended the NEAR VC Virtual Summit, where insights and developments in the NEAR ecosystem were unveiled. This summit showcased the potential of NEAR Protocol and its associated projects, highlighting achievements, upcoming milestones, and strategic initiatives. Industry leaders, developers, and investors gathered to ask questions and understand the future prospects within the NEAR ecosystem. The summit provided an overview of the NEAR initiatives and development alongside the narratives NEAR will focus on in the coming months.

• NEAR hit an all-time high of 12.4M daily transactions, maintaining 6-9M daily in May, and consistently achieving over 1M daily transactions since Sept 2023. Kaikai has 10M monthly active users, Hot has 4M+, and Sweat has 1.8M+ monthly active users. NEAR also has the lowest transaction fees among the top 20 blockchain networks.

Source: NEAR Foundation, Pikespeak

• Coming summer of 2024: Nightshade 2.0 launch – the biggest change to the protocol since the mainnet launch. This will implement stateless validation and significantly improve single shard performance alongside scaling to more shards.
• With 20+ teams building with chain signatures, the platform will feature multichain account abstraction.
• Omnitoken launch at the end of August: Omnitoken is a cross-chain token available on all chains via chain signatures (EVMs, Solana, Bitcoin, etc.). It has a token supply managed on NEAR, is fully compatible with ERC-20 standards, and is transferable between chains via OmniAddress. It will have a modular design that supports multiple message-passing layers and light clients, managed per chain.
• NEAR also discussed a user-owned AI stack and an AI router connecting web2 consumer apps to on-chain agents utilizing network data. They showcased Kaiching, a platform where users get paid to let companies use their data, with an 85% retention rate over one week.

Source: NEAR Foundation

• NEAR Horizon AI Incubation Program: a 12-month incubation experience for decentralized AI projects building key infrastructure for the user-owned AI ecosystem. The first three months will feature cohort-based programming, followed by dedicated account management working directly with NEAR from months four to twelve.

TokenFuture 2024 – Recap

Our team member recently attended the TokenFuture 2024 event, where three key takeaways emerged. Firstly, tokenization offers significant advantages such as instant settlement, lower costs, and democratized access, driving market changes and adoption across various sectors. The event highlighted the growth of stablecoins, tokenized money market funds, and unique asset tokenization. Additionally, discussions delved into the future of financial instruments like stablecoins, CBDCs, and deposit tokens, emphasizing collaboration with regulators and innovative approaches. Challenges were also noted, including regulatory compliance and trust issues with stablecoins, alongside opportunities to bridge traditional and digital finance infrastructures through technology enhancements and new business models. Specific panel insights emphasized the need for regulatory alignment, market dynamics understanding, and strategic risk management in tokenized assets to enhance price discovery and liquidity.

Panel: Regulation Today: What's in Place and What's Still Needed?
Patrick Hansen, Circle. Christian Moor, EBA. Victoria Jahn, Waldeck. Peter Grosskopf, Iron. Louis Tellier, The Big Whale.

• There is need for global regulatory alignment given the international nature of the technology. European regulation (MiCA) implements borders despite borderless technology.
• Investors are in early stages of integrating digital assets into traditional infrastructures.
• Regulations are typically reactive rather than proactive.
• Regulatory compliance and permissionless infrastructure often conflict.
• MiFID II should be the baseline with no further limitations.
• Basel compliance is challenging for banks in the DeFi space.
• Liquidity will shift to MiCA-compliant stablecoins.
• MiCA reviews until 2027 will address and correct mistakes.
• MiFID II regulated entities can expand their business models to MiCA.
• Need for cooperation between regulators and market participants to expedite processes.
• Germany’s EPG Regulation aims to trade crypto assets like traditional assets, offering a chance to build holistic infrastructure.

Keynote: Institutional-Grade Infrastructure for Tokenizing Real-World Assets
Emanuele Francioni, Dusk Network.

• Tokenization is essential for the future of financial markets, shifting from platform-based to protocol-based infrastructure.
• Key concepts: Digitization (Representation), Tokenization (Synthesis), Native Issuance (Inception).
• Fragmentation: 24 Central Securities Depositories (CSDs) in the EU.
• KYC expenses: $14.25M annually for KYC and AML.
• Settlement fails: 6-8% of equity settlements in the EU fail.
• Inefficiencies of T2S: €458.1M development costs for ECB, not profitable for 14 years.
• Vertical ownership: 60% of CSDs owned by exchanges.
• DLT regime offers fast finality, cost efficiency, and open extensibility.
• Compliance requires privacy-preserving transactional models and robust digital identity protocols.

Panel: Fund Tokenization: Key Enablers for Scalable Adoption
Torsten Hunke, VanEck. Kurt Zeimers, BNP Paribas. Christoph Hock, Union Investment. Bruce Jackson, Apex Group. Barbara Schlyter, DWS.

• Fund tokenization driven by tech advancements; in 5+ years, all assets may be tokenized.
• Can be applied across various asset classes.
• Attracts new investor bases, allowing retail investors access to institutional products.
• Offers cost efficiency and faster settlement processes.
• Enables 24/7 trading and liquidity, though some panelists challenged this.
• BNP Paribas cited regulatory gaps and the readiness of custodians and depositaries as concerns.
• Further governance and cultural shifts by investors needed, along with additional education on tokenization.

Source: NEAR Foundation, DeFiLlama, Artemis

Sector Commentary

• Layer One / Altcoins
  • Bitcoin ($BTC): Dogecoin, Solana Lead Crypto Majors Plunge as Bitcoin Falls Below $66K (link)
  • Bitcoin ($BTC): Bitcoin analyst ‘optimistic’ of buying BTC lower as 3 trendlines fail (link)
  • Bitcoin ($BTC): Bitcoin falls below key support level, potentially triggering 8%-12% correction: CryptoQuant (link)
  • Bitcoin ($BTC): Long-term holders gradually selling indicates bitcoin may be entering a consolidation phase: analysts (link)
  • Bitcoin ($BTC): Why are top Bitcoin traders bullish despite BTC price dip to $64.3K? (link)
  • Bitcoin ($BTC); Ethereum ($ETH): XRP, LINK, ETH Stand Out Relative to BTC in Sector Rotation Analysis, DOGE Struggles (link)
  • Bitcoin ($BTC); Ethereum ($ETH): Bitcoin and Ether can ‘greatly improve’ portfolio performance: BBVA (link)
  • Ethereum ($ETH): Ethereum price to $10K is the most ‘asymmetric bet’ in crypto — Analyst (link)
  • Ethereum ($ETH): Ethereum’s recent pullback could be a gift: Dynamo DeFi, X Hall of Flame (link)
  • Ripple ($XRP): US SEC pushes back against Ripple's efforts to lower its fines saying the firm 'is agreeing to nothing' (link)
  • Uniswap ($UNI): UNI Advance Led CoinDesk 20 Gainers Last Week: CoinDesk Indices Market Update (link)
  • Dogecoin ($DOGE): Dogecoin Bulls See $60M Liquidations in Biggest Hit Since 2021 (link)
  • Altcoins: AI-Related Coins Slide as Google Search Shows Peak Retail Investor Interest (link)
  • Altcoins: Solana-based DJT memecoin continues surge amid unsubstantiated report that it's tied to Trump (other PolitiFi tokens sell off) (link)
• DeFi
  • Renzo Capitalizes on Restaking Frenzy to Raise $17M From Galaxy, Brevan Howard (link)
  • ZKsync Airdrop of 'ZK' Token Puts Initial Market Cap Near $800M (link)
  • DeFi Heavyweight Curve Focused on Becoming ‘Safest’ Lending Platform, Founder Says (link)
  • Stablecoins will keep winning because they are a 'fundamentally better product,' says Ryze Labs Matthew Graham (link)
  • Transak adds fiat-to-crypto onramp for PayPal USD (link)
• Web3 / AI / NFTs
  • Protocol Village: Ronin Chain, From Axie Infinity Creator, to Launch zkEVM With Polygon Tech (link)
  • Fox Corporation onboards TIME as first publishing partner on Polygon-based Verify Protocol (link)
  • Crypto returns will remain muted as investors chase AI gains, economist says (link)
  • Bitcoin NFTs surpass Ronin in all-time sales (link)
  • Holy Tokens? The Vatican Library Is Giving Donors Soulbound NFTs (link)
• RWA / Tokenization / Metaverse / Gaming
  • Tether Debuts New 'Synthetic' Dollar Backed by Tokenized Gold in Tokenization Push (link)
  • RWA Tokenization Expands to Life Insurance with Infineo Minting $9M of Policies on Provenance Blockchain (link)
  • Sonic, Gaming-Focused Layer-2 Chain on Solana, Raises $12M (link)
  • Notcoin founder sets out how Telegram games, including his own, will evolve (link)
  • FalconX launches support for USTB-collateralized trades as tokenized US government securities gain ground (link)
• Digital Infrastructure: Capital Markets / Exchanges / DAOs / Mining
  • MicroStrategy Is Pioneering Bitcoin Capital Markets, Bernstein Says (link)
  • MicroStrategy Increases Convertible Note Offering by 40% to $700M in Bitcoin Splurge (link)
  • Pantera Blockchain Letter, June 2024: “Newsflash, Crypto Owners Vote” (link)
  • Coinbase: The State of Crypto: The Fortune 500 Moving Onchain (link)
  • Op-Ed: Crypto for Advisors: Advisors and Crypto (link)
  • Hashdex proposes new ETF that would own both spot Ethereum and Bitcoin (link)
  • Bitcoin Investment Products Saw Over $600M in Outflows Last Week: CoinShares (link)
  • Spot bitcoin ETFs see $145 million exit as outflows persist (link)
  • Australian Securities Exchange Gives Its First Approval of a Spot Bitcoin Listing to VanEck (link)
  • Ether ETF's Lack of Staking Won't Dampen Strong Institutional Demand, 21Shares' Ophelia Snyder Says (link)
  • Global Ethereum ETPs outperform Bitcoin counterparts ahead of anticipated ETF launch in US (link)
  • Bitcoin Hashrate May Finally Slow as Miners Face Scorching Summer Heatwaves (link)
  • Telecom Giant and T-Mobile Parent Deutsche Telekom Plans to Mine Bitcoin (link)
  • U.S.-Listed Bitcoin Miners Reached Record Total Market Cap of $22.8B in June: JPMorgan (link)
  • CleanSpark acquires 5 mining facilities in Georgia (link)
  • TXSE ‘upstart’ stock exchange could become a crypto-friendly challenger (link)
  • Coinbase starts offering pre-launch markets trading on its international and advanced exchanges (link)
  • Financial Stability Board to Extend Its Work on Stablecoin Risks in Emerging and Developing Economies (link)
  • Crypto Trading Firm Cumberland Acquires New York's BitLicense (link)
  • FTX Victims View Bankruptcy Process as 'Second Act of Theft,' File to Recover $8B in Forfeited Assets (link)