Welcome to the Weekly Axis.

More Bitcoin bullishness, a question about Stablecoins, and a Deep Dive into Real World Assets.

Axis Updates

Catch up on this week’s big crypto stories.

Bitcoin Bullishness as SEC Deadline Looms

Summary: This week, amid the das turmoil in Israel and Gaza, we initially saw a small decline in bitcoin and other crypto assets to follow. This makes sense. As we see the possibility of war, especially in the Middle East, we first see oil prices rise, and many risk assets fall. People are initially going to cash, just in case. Of course, inflation is still around, so the Macro thesis for bitcoin is still going strong. Paul Tudor Jones came out again and said its a tough time to invest in US equities, but he’s increasing his position in stores of value like gold and bitcoin

Yesterday was the deadline for the SEC to appeal the ruling in the Greyscale case. Since they didn’t appeal, it may be a sign that they plan to approve the spot ETFs in the near future.

The SEC has also been engaging with all the firms in the application pipeline, and many have revised their applications to appease the requests of the SEC. Many trying to read the tea leaves say this is also a sign that an approval is imminent.

Impact on Financial Professionals: We’ve talked at length about the expected impact of a spot BTC ETF approval. It would likely increase prices of BTC, ETH, and other crypto assets. You should be planning accordingly. If you’re clients are already allocated to crypto, what is the plan for a large increase in price? Are you going to reallocate? Can they get into spot BTC via Coinbase or Kraken before the approval. I also outlines a potential short-term play here:

If your clients want bitcoin exposure with 1-5%, but you're waiting for the ETF approval, GBTC might be the play.

Waiting for ETF for any allocation: BTC price shoots up (maybe 2x) on day of approval. You get clients in at $52k BTC. Still likely 1-5% allocation.

Put them in GBTC now: BTC shoots up on approval. GBTC converts to ETF. Your clients get 16.5% + gain in BTC price, and they're already in the ETF. Based on your plan with them, you can then take some off the table and still have 1-5% allocation.

Caveat: if spot ETF doesn't get approved, BTC likely plummets and GBTC discount gets steeper. Investment likely loses 50% overall. Is that a good risk/reward for 1-5% of their portfolio.

ADVISOR QUESTIONS

Question of the week:

What's the Point of Stablecoins Without High Yields?

So, the question goes like this: "I used to hold stablecoins in DeFi a couple of years ago when the yields were sky-high. But now that the yields have dropped, I don't see the point in holding them anymore. What's the purpose of stablecoins without earning high yields?"

This is a great question, and it touches on the essence of stablecoins and their evolving role in the crypto landscape.

Yields vs. Purpose

First off, it's crucial to understand that the pursuit of high yields should never be the sole reason for using decentralized finance (DeFi) or stablecoins. While it's true that DeFi protocols used to offer double-digit yields, they also came with significant risks. You were essentially trading higher yields for higher tech and security risks.

Over time, as the crypto market matured, people naturally sought more stable and less risky alternatives, like traditional treasury bonds or money market accounts, which now offer better yields with less risk.

Tokenized Treasuries and Global Access

What's interesting is that we've seen the emergence of tokenized versions of treasuries. These tokens provide access to risk-free rates, even for those who can't access U.S. bank accounts. DAOs and individuals from around the world are embracing these tokenized treasuries, showing that the demand for interest-bearing assets within the crypto space is still very much alive.

The True Purpose of Stablecoins

Now, let's get to the heart of the matter. The primary purpose of stablecoins is not to serve as high-yield investment vehicles. Stablecoins were designed to facilitate instant, transparent, and permissionless transactions in a currency with relatively stable value, as opposed to the volatility of cryptocurrencies.

In today's world, stablecoins represent a significant milestone in the adoption of blockchain technology. They're being integrated into platforms like Visa, PayPal, and Shopify because they offer a more efficient way to transfer value globally. This translates to lower fees and instant settlement, and it's just the beginning. As the financial landscape evolves, these efficiencies are likely to lead to lower prices for goods and services, benefiting consumers worldwide.

The Bigger Picture

In a nutshell, the purpose of stablecoins goes far beyond the pursuit of high yields. It's about transforming the way we transact, trade, and transfer value in the digital age. Stablecoins are at the forefront of this financial revolution, impacting the valuation of crypto assets built on top of blockchain technology.

So, to answer the question: Stablecoins are not just about earning interest; they're about reshaping the future of finance and making it more accessible, efficient, and secure for everyone.

Deep Dive

The Power of Real World Assets in Blockchain and DeFi

Summary: In this week's Deep Dive, we will delve into the concept of real-world assets and their potential impact on the blockchain and crypto space. Real-world assets refer to tangible assets like real estate, private companies, and income streams that can be represented on the blockchain through tokens. These tokens act as a digital representation of the asset and can be used to interact with decentralized finance protocols, such as Aave and Maker. By bringing real-world assets on-chain, we unlock various benefits, including self-custody, liquidity, and the ability to use them as collateral for loans. This tokenization of assets opens up new possibilities for financial professionals to enhance their clients' portfolios and provide greater efficiency in managing investments.

How it Affects Financial Professionals: As a financial professional, understanding the concept of real-world assets and their integration into the blockchain ecosystem is crucial. This development presents an opportunity to incorporate these assets into client portfolios, offering increased liquidity and potential for collateralized loans. By leveraging the self-custody feature of blockchain, you can provide clients with greater control and ownership over their assets, eliminating the need for centralized custodians. Additionally, the immediate settlement of transactions on-chain enhances efficiency and opens up avenues for more streamlined exchanges. This shift towards tokenization of real-world assets aligns with the growing trend in the industry, with estimates suggesting trillions of dollars' worth of assets being tokenized in the future. By staying informed and adapting to this evolving landscape, financial professionals can position themselves as trusted advisors in the crypto space, providing valuable insights and guidance to clients seeking to navigate this new frontier.

Thanks for reading.

— Adam