Welcome to The Weekly Axis.

This week we have even more tokenization talk from a major asset manager, some questions from advisors, and a deep dive into Zero Knowledge Proofs

Let's dive in!

Axis Updates

Catch up on this week’s big crypto stories, and how they affect you.

UBS Explores Money Market Funds on Ethereum

Summary: UBS, a major asset manager and bank, has announced plans to pilot a program for tokenizing money market funds on the Ethereum blockchain. This move aligns with the growing trend of tokenizing traditional assets and signifies UBS's interest in exploring the concept of tokenization. The appeal lies in the transparency, instant settlement, and easier custody that tokenization offers. By tokenizing money market funds, UBS aims to enhance speed and efficiency in exchanging these stable assets. Notably, the choice of the Ethereum blockchain suggests an anticipated increase in demand for the network and its native cryptocurrency, ETH.

Impact on Financial Professionals: For financial professionals, UBS's foray into tokenization on Ethereum highlights the potential value and utility of blockchain technology in the financial industry. The transparency and instant settlement provided by tokenization can streamline processes and improve operational efficiency. Financial advisors and CPAs should take note of this development as it signifies a growing interest in integrating crypto assets into client portfolios. Understanding the fundamentals of tokenization and blockchain technology will be crucial for financial professionals to effectively navigate this evolving landscape. By staying informed and knowledgeable about crypto, financial professionals can better serve their clients and engage in meaningful conversations around incorporating crypto assets into investment strategies.

The Underwhelming Response to ETH Futures ETFs

Summary: This week, ETH futures ETFs were introduced to the market, but the response was underwhelming, with only around $16 million invested in them. This lackluster reception is likely due to investors and advisors waiting for the approval and launch of spot ETFs. The SEC's decision to allow ETH futures ETFs makes it difficult for them to justify not allowing spot ETFs, especially after the recent grayscale ruling. While there wasn't much media hype surrounding the ETH futures ETFs, it seems that investors are savvy enough to wait for the real thing, indicating that the demand for spot ETFs is still high.

Impact on Financial Professionals: Financial professionals, including advisors and CPAs, should take note of the lukewarm response to ETH futures ETFs. This suggests that clients are more interested in spot ETFs and may be hesitant to invest in futures-based products. As professionals in the industry, it is important to stay informed about the developments in the crypto market and be prepared for the potential launch of spot ETFs. This knowledge will enable financial professionals to have meaningful conversations with clients about incorporating crypto into their portfolios and address any concerns or questions they may have. Understanding the evolving landscape of crypto investments will help advisors and CPAs effectively navigate this emerging asset class and provide valuable guidance to their clients.

Advisor Questions

Question from this week:

"I'm a value investor. I like cash flows. Seems the only valuation for crypto is more technical. Is there a time when we think crypto will have fundamental value?"

This question is not only valid but also echoes the sentiments of many financial advisors who are traditionally accustomed to evaluating investments based on intrinsic values and cash flows.

The Journey Towards Fundamental Valuation

Yes, cryptocurrency is inching towards having a fundamental value, albeit with a different approach compared to traditional assets. The valuation of crypto assets, particularly Bitcoin (BTC) and Ethereum (ETH), is currently influenced by several factors, including regulatory approvals (such as the approval or denial of spot ETFs) and macroeconomic factors (like inflation hedging).

However, it’s imperative to note that the crypto space is diverse and multifaceted. Different crypto assets will eventually be evaluated based on varying metrics due to their distinct purposes and use cases. For instance, while BTC is often viewed as an inflation and government hedge, ETH is valued for its staking capabilities and demand in purchasing block space.

Diversity in Crypto Assets: A Parallel with Traditional Assets

Just as gold, real estate, tech stocks, and private credit have found their unique spots in investment portfolios, different cryptocurrencies will carve out their own niches. They exist symbiotically, catering to varied purposes and should not be viewed as competitors where one emerges as the "winner."

Adoption as a Driver for Valuation

The adoption of underlying blockchain technology, especially in practical applications like USDC, stablecoins, and tokenization, should theoretically drive fundamental valuation. The more a cryptocurrency is utilized in real-world applications, the more its intrinsic value becomes apparent.

Frameworks to Explore

For those seeking to deepen their understanding and explore frameworks around ETH valuation, consider delving into:

• Fidelity Digital Assets and their investment thesis

• The Ethereum Valuation Framework from Michael Nadeau and the DeFi Report

Join Us in the Exploration

Deep Dive

Zero Knowledge Proofs: Unlocking Trust in the Financial World

Summary: Zero-knowledge proofs, also known as ZK proofs, are cryptographic tools that allow individuals to prove certain information about themselves without revealing all of their personal data. This concept has been around for a while and is now gaining traction in the financial services industry. In traditional financial transactions, individuals often have to provide extensive personal information, such as tax returns, bank statements, and credit history, which can be time-consuming and pose privacy concerns. Zero-knowledge proofs offer a solution by enabling individuals to prove their eligibility for services, such as mortgages, investments, or insurance, without disclosing unnecessary personal details. By connecting their wallets to the relevant platforms or protocols, individuals can have their information verified through a hash algorithm, ensuring that they meet the necessary criteria. This process can be completed quickly and securely, reducing the need for repetitive information sharing and streamlining financial transactions.

Impact on Financial Professionals: Zero-knowledge proofs have significant implications for financial professionals, including financial advisors and CPAs. These tools enable professionals to incorporate cryptocurrencies and blockchain technology into their practice and client portfolios. By understanding and utilizing zero-knowledge proofs, financial professionals can facilitate faster and more secure transactions, such as mortgage approvals or investment verifications, without compromising client privacy. This technology allows for instant eligibility checks based on predetermined criteria, eliminating the need for extensive paperwork and manual verification processes. Financial professionals can leverage zero-knowledge proofs to enhance their services, provide more efficient client experiences, and stay ahead in the evolving landscape of crypto and blockchain integration.

Thanks for reading.

This is where you add your parting words.

— Adam