Commentary

Growing Synthetic Dollar Adoption, The Revolut X(change), US House vs. SEC

Week in Review

Commentary

Growing Synthetic Dollar Adoption, The Revolut X(change), US House vs. SEC

Introduction

Week in Review

  • FTX claims rise above 100 cents on the dollar off the back of a bankruptcy plan
  • The digital bank Revolut launches a crypto exchange
  • House votes to challenge SEC’s anti-crypto banking guidance SAB 121

Bitcoin's soft recovery, Tesla's DOGE dash, growing synthetic dollar adoption

This week witnessed a rebound in the crypto markets, with the total market capitalization of the crypto sphere increasing by 3.2%, and bitcoin dominance inching higher, although still below 53%. Among the major cryptocurrencies, bitcoin rallied 5% compared to the previous week, while ether remained largely unchanged, registering a modest 0.1% weekly gain. In the realm of US-listed spot bitcoin ETFs, there were a couple of days marked by notable triple-digit inflows, while other days experienced mixed activity with subdued flows, albeit with GBTC inflows surprising investors. Notably, GBTC witnessed its first inflow of $63.9 million last Friday, followed by another inflow worth $3.9 million on Monday. Conversely, activity in HK-listed spot ETFs remained subdued, with cumulative daily flows amounting to $25.9 million in spot bitcoin ETFs and $5.7 million in spot ether ETFs.

Among the “OG” meme coins, dogecoin recorded a weekly gain of 10.1%. On May 4, Tesla quietly updated its website to indicate that it has started accepting DOGE as payment for certain products. Although purchasing a car with DOGE is not an option, customers can use the cryptocurrency to buy various merchandise. The process involves a short timeframe for sending a specific amount of DOGE to Tesla's wallet, covering taxes and fees. Failure to complete the transaction in time will result in a reset and the generation of a new DOGE amount based on the token's updated price. All purchases made with DOGE are final and cannot be canceled or returned. Although Tesla did not make a formal announcement regarding this move, both Tesla and DOGE enthusiasts quickly took notice. This is not the first instance of Tesla accepting cryptocurrency payments. In 2021, Tesla made headlines by investing $1.5 billion in bitcoin and introducing bitcoin as a payment method for its products. However, within a few months, Tesla reversed its decision and ceased accepting bitcoin as a form of payment.

The governance token of the decentralized finance (DeFi) protocol Ethena, ENA, surged by 9.4% compared to the previous week. The token experienced a significant uptick on Tuesday following the announcement of its integration into the trading activities of crypto exchange Bybit, which adopted the protocol's USDe "synthetic dollar," thereby enhancing the token's utility. Ethena recently disclosed a strategic partnership with Bybit to incorporate USDe as a collateral asset for trading perpetual futures of all assets in the exchange's UTA. This move aims to offer users the opportunity to generate yield and enhance capital efficiency. Additionally, the integration will introduce bitcoin and ether spot trading pairs with USDe, as outlined in a press release

USDe is also set to be available on Bybit's Earn platform, enabling users to utilize their synthetic dollars for Bybit launchpool farming.

FTX claims above parity, the Revolut X(change), US House vs. SEC

Transitioning from token markets to claim markets, FTX claims have begun trading above parity, spurred by the estate's draft recovery plan projecting a majority of creditors will see a recovery rate of 118%. For example, data from the crypto bankruptcy site Xclaim indicates that FTX claims are currently trading between 101% and 112%. 

FTX intends to provide at least 118% of allowed claims to 98% of its creditors, as outlined in its reorganization plan unveiled on Tuesday. Creditors with allowed claims under $50,000 will qualify for the 118% compensation upon court approval, as per the plan. FTX's proposal schedules repayment are to occur within 60 days after the plan's effective date. The release further notes that FTX has monetized a diverse range of assets, primarily sourced from investments held by Alameda and FTX Venture businesses, or from litigation claims. Given FTX's comparatively minimal holdings of bitcoin and ether at the time of the collapse, debtors did not benefit from the recent surge in their values.

Revolut, the digital bank with over 40 million customers globally, unveiled its crypto exchange, Revolut X, targeting professional cryptocurrency traders. The London-based platform aims to rival leading crypto exchanges by offering lower fees. While Revolut has facilitated buying and selling crypto within its app for years, it recently introduced Revolut X as a standalone exchange, encouraging users to trade directly through it. Notably, Revolut imposes zero fees on trade makers and a 0.09% fee on trade takers, positioning itself as a competitive player in the cryptocurrency trading space. This development marks Revolut as one of the first banks to develop a dedicated crypto exchange, reflecting the growing integration of cryptocurrencies into mainstream financial services.

The US House of Representatives recently voted to approve a resolution rejecting the Securities and Exchange Commission's (SEC) cryptocurrency accounting guidance, namely Staff Accounting Bulletin No. 121 (SAB 121), following extensive criticism from industry stakeholders and Republican lawmakers. This bulletin, first published in 2022, has sparked controversy over the past year within the crypto industry, with concerns that it could hinder banks from safely holding digital assets. The bulletin mandates that firms holding cryptocurrencies for clients must list these holdings as liabilities on their balance sheets. However, the future of this measure is uncertain. 

The White House released a "statement of administration policy" on Wednesday, indicating that President Joe Biden would veto it. The White House's stance is based on the belief that restricting the SEC's ability to regulate crypto-assets effectively could introduce financial instability and market uncertainty. The resolution may now proceed to the Senate Banking Committee for further review and subsequent voting by the full Senate, underscoring the ongoing debate surrounding the regulatory framework for cryptocurrencies. Proponents advocate for clearer guidelines to foster innovation while safeguarding investor interests, highlighting continued scrutiny of the SEC's actions in the crypto space and their broader implications for financial markets.

Macro pulse 

Among the risk assets in TradFi markets, Oil futures posted a modest weekly gain of 0.3%, while the US equities rallied 3.4% compared to previous week. Majority of these gains followed a non-farm payrolls (NFP) report that was softer than expected, but did not indicate a significant downturn in the labor market. Additionally, a moderation in wages helped ease concerns among investors about stagflation or a recession. Elsewhere, the US Dollar index slipped 20bps and the 10 year US Treasury yields dropped by 15bps while the Gold & Silver index rallied by 2.6% week on week.

*Note: Weekly (7 calendar day) performance figures are as of 8am SGT on May 09, 2024 

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