Valour Monthly Update – July ’23

Crypto markets fared favourably throughout most of July experiencing little overall volatility. Indeed, the Fed’s quarter percentage point rate increase did little to move markets despite taking interest rates to their highest point in 22 years. Whilst BTC did see a slight increase in intraday volatility towards the end of the month, it is worth noting its considerably lower standing than the volatility experienced by traditional financial markets including the S&P 500, Nasdaq, and perhaps more surprisingly, Gold.

Given Bitcoin’s current near zero correlation with traditional assets, institutional interest has unwavered, with the SEC accepting refiled ETF applications from the likes of ARK, BlackRock, WisdomTree and Fidelity. With preliminary responses expected between mid August and early September, the SEC’s decision will undoubtedly play a large role in how market liquidity will shape up following a predominantly stagnant trend since late last year.

Notwithstanding low BTC spot volumes, July saw positive trends in daily aggregate volumes and total AUM figures for digital asset investment products reaching a total of $33.7bn. This second consecutive month of AUM growth comes in parallel to the discount on Grayscale’s GBTC trust falling some 26% amidst the growing institutional sentiment. Seemingly, the paradigm shift surrounding crypto markets has continued to gain momentum, with both retail and institutional investors optimistic about future regulatory developments ahead of next year’s Bitcoin reward halving.

In the News:

Policy

• U.S.-based exchange Kraken has been ordered by a district court to provide the IRS with user data on activity exceeding $20,000 within a calendar year for tax compliance purposes.
• Crypto exchange, Bittrex, has submitted a motion to dismiss its case with the SEC regarding the trading of investment contracts.
• Hong Kong’s government has formed a Web3 task force to oversee the development and ethical growth of the region’s innovation and exploration relating to Web3 technologies.
• Singapore’s Monetary Authority (MAS) has introduced new requirements for crypto service providers to hold customer assets in statutory trusts to further protect investors.
• Lawmakers in the EU have moved forward with the European Data Act which aims to ensure smart contracts include a kill switch option allowing them to be safely terminated, drawing criticism from the wider crypto community.
• The capital of Eastern China’s Shandong province has increased its efforts to encourage adoption of the country’s CBDC by introducing digital Yuan payments across its bus routes.
• The UK’s House of Lords has moved forward with its planned Economic Crime and Corporate Transparency Bill aimed at increasing the ability of authorities to target crypto funds used for illicit purposes.
• South Africa’s Financial Sector Conduct Authority (FSCA) announced that all crypto exchanges operating in the country will need to obtain licensing by the year’s end.
• India’s reserve bank (RBI) is assessing the feasibility of using its digital rupee CBDC as a means of a cross-border payment, with banks from 18 other countries having been onboarded since 2022.
• United Arab Emirates’ crypto free zone has partnered with the HBAR Foundation to assist its ecosystem members via a grants program, providing technology, marketing and business support for wider Web3 adoption.
• The European Commission’s blockchain sandbox has unveiled the first 20 projects in its cohort to receive legal and regulatory guidance as part of its efforts in bridging the gap between European nations and crypto companies.
• Israel’s parliament has passed a preliminary reading of a crypto bill seeking to exempt foreign residents from paying taxes on cryptocurrency gains to attract foreign investments in the country’s evolving crypto market.
• Namibia’s government has passed a bill regulating cryptocurrencies and virtual assets with the new legislation introducing a framework to oversee the use and trading of digital assets within its jurisdiction.
• The NYIC Federal Reserve bank has successfully completed a proof-of-concept for a regulated liabilities network via the use of the wCBDC central bank digital currency.
• Ripple Labs celebrated a landmark ruling against the SEC as the judge presiding over the case established that Ripple’s token sale did not violate securities laws as well as determining that the XRP token is not a security.
• Ripple Labs announced its pilot program to tokenise real estate assets for use as loan collateral while leveraging the blockchain-based payment network’s CBDC platform.
• Several Korean banks have announced plans to research the use of tokenised deposit technology as an alternative to stablecoins and CBDCs, addressing uncertainties surrounding stablecoins following their tumultuous year in 2022.
• Russia has officially introduced the digital ruble, with Russia’s central bank digital currency being passed into law for roll out to real consumers as of August 1st.
• The Financial Stability Board (FSB) has published its global regulatory framework for crypto-asset activities aimed at promoting a comprehensive and consistent international approach to crypto related regulation and supervision.
• The Pacific Island nation of Palau has launched a pilot project for a USD-backed stablecoin that utilises Ripple’s CBDC platform. Business
• Google Cloud has partnered with Bitcoin Lightning infrastructure provider Voltage to roll out Bitcoin-based services worldwide and explore other Bitcoin related solutions.
• Launched by OpenAI founder, Worldcoin has deployed its token that aims to distinguish humans from bots for online verification, enhancing online security and issues relating to bot-driven interactions.
• Professional services giant Deloitte has partnered with blockchain analytics firm Chainalysis to enhance compliance and law enforcement efforts in the crypto industry, addressing issues related to illicit activity and overall improvements in the ecosystem. Markets
• Celsius Network received approval to convert its altcoin holdings into BTC and ETH to enhance accessibility and liquidity for the distribution of funds to creditors, emerging from bankruptcy after its recent settlement agreement.
• The premium for Bitcoin futures reached an 18-month high, reaching 6.3% amidst increased demand for leveraged BTC longs, in light of refiled Bitcoin ETF applications.
• Crypto-friendly DBS Bank announced the launch of its e-CNY merchant solution in China, allowing businesses to receive payments in the CBDC and have it automatically settled in their CNY deposit accounts.
• The OPNX crypto futures exchange has launched its own oUSD currency for margin trading, with the second phase of its implementation aimed to solve the challenge of bankruptcy remoteness.
• Crypto exchange BitgetX has joined Hong Kong’s Virtual Asset Consortium (HKVAC) to provide ratings services and indexes for cryptocurrencies.
• HSBC has started trialling quantum-resistant cryptographic solutions on the BT-Toshiba metro network, exploring solutions for a quantum-safe financial transaction network in the UK.
• The decentralised dYdX exchange has launched its v4 testnet, offering full decentralisation with increased user control, improved transparency, and fewer risks of central points of failure.
• Bitcoin miner fee revenue surged during Q2 of 2023 reaching a high of $184m, surpassing the total revenue earned throughout 2022.
• A report by PwC and Aspen Digital highlighted the rise in crypto staking as total value of custodied funds rose to $447.9bn in 2022, with 120 providers identified.
• The U.S. Department of Justice has moved roughly 10,000 BTC seized in connection with the Silk Road marketplace, with the DOJ having announced its plans to sell the remainder of its seized coins over four tranches this year.
• Securitize has started tokenising equity in the Spanish real estate investment trust Mancipi Partners, with secondary trading on Avalanche soon to come. The trading platform is set to implement the first natively tokenised equity issuance as part of EU’s DLT pilot regime supervised by the ESMA.
• Hacker(s) exploited a vulnerability in Curve Finance liquidity pools that leverage the Vyper programming language, resulting in losses of $52m across several DeFi protocols.

Tech

• Layer-2 infrastructure provider StarkWare has deployed its StarkNet Quantum Leap testnet upgrade, aimed at achieving a 50x increase in throughput alongside a 10 second ‘time to inclusion’.
• Blockchain infrastructure developers, ConsenSys, has launched its zero-knowledge Layer-2 scaling solution to further increase Ethereum’s throughput, with the Linea network integrating directly into the company’s MetaMask browser wallet for bridging and swapping functionality.
• Binance completed its integration of the Bitcoin Lightning network to enhance the speed and efficiency of bitcoin deposits and transactions on the exchange, offering users faster settlement times and reduced fees.
• Layer-2 scaling solution, zkSync, has launched a new STARK based proof system (Boojum) for increasing transaction scalability, able to run on consumer-grade general processing units (GPUs).
• Chainlink Labs announced the launch of its cross-chain interoperability protocol (CCIP) on the Ethereum, Avalanche, Polygon, Arbitrum and Optimism mainnets to enable the transfer of data between public and private blockchain environments from backend systems.
• Bitcoin marked a significant milestone after the 800,000 block was mined. With block rewards halving every 210,000 blocks, the next block halving will take place at block height 840,000, reducing the block reward size to 3.125 BTC.

Valour’s Monthly Overview

July signified several exciting developments marked by Valour’s launch of the Valour Digital Asset Basket 10 (VDAB10) ETP on the Nordic Growth Market (NGM), as well as its groundbreaking collaboration with crypto-native, Bitcoin Suisse AG, reflecting exciting developments across the company’s pipeline of innovative products.

July 18: Valour Inc. Announces its Collaboration with Bitcoin Suisse AG on Physical Backed Digital Asset Exchange Traded Products

Valour Inc. announced its collaboration with Swiss crypto-finance and technology pioneer Bitcoin Suisse AG to list, operate and distribute physically backed ETPs in the international and Swiss market. Founded in 2013, the Swiss-based trusted gateway to crypto asset investing offers institutional-grade services at the forefront of technical innovation. The new partnership will leverage Valour’s ABS issuance platform and operational know-how, whilst simultaneously benefiting from Bitcoin Suisse’s established brand and longstanding experience in the crypto sector both within Switzerland and internationally. Commenting on the partnership, DeFi Technologies CEO and Valour Director Olivier Roussy Newton highlighted the significance of this development in the digital asset space, contributing towards creating more robust and diversified opportunities for investors. The news follows Valour’s launch of its first physical backed ETP with the 1Valour Bitcoin Physical Carbon Neutral ETP (ISIN: GB00BQ991Q22), with the ETP’s respective digital assets being physically secured by regulated custody providers.

July 12: Valour Inc. Announces the Launch of the Valour Digital Asset Basket 10 ETP on Nordic Growth Market (NGM)

Valour Inc. announced the launch of its Digital Asset Basket 10 (VDAB10) ETP in the Nordics, offering retail and institutional investors diversified exposure to the digital asset ecosystem via one single product. Providing access to 10 of the largest cryptocurrencies by market capitalisation, the multi-asset ETP undergoes quarterly rebalancing to facilitate investor access to the rapidly developing digital asset landscape. Comprising several prominent digital assets including Dogecoin, Binance BNB, and Polygon, the launch in the Nordics reflects the company’s commitment to innovation and diversification, continuing to offer products that meet the diverse needs of its investors.

Venture Spotlight:

Valour’s portfolio companies have been diligently building out their products and developing new partnerships. Here are some of their highlights over the month of July.

Boba Network celebrated a milestone as BobaBNB surpassed the 10M transaction count. This comes as the network announced a new partnership with Uniswap v3 powered Oku Trade, allowing users to seamlessly deploy and manage positions as well as utilise limit and market orders for every v3 pool pairing.

Blocto announced that it has officially integrated Polygon into its native app to offer email/social login, hybrid mode, cross-device integration, amongst other features. Launching its ecosystem program for Polygon, the company is offering $1m in rewards over the next 3 months to foster the growth of the next million users within the Polygon ecosystem.

CLV highlighted some of their progress from Q2 of 2023, drawing attention to the technical upgrades and ecosystem partnerships. Wallet upgrades aside (mobile and extension), integrations with GateKeeper, Humanode, Arteus, and PolygonID have expanded the CLV partner ecosystem, increasing dApp functionality and enabling verifiable credentials for identity management via their enhanced security and privacy technologies. Sovryn released support for AMM swaps on its native web app, signifying the company’s continued progress away from Sovryn Alpha. Having completed a system-wide security audit, improved onboarding experience, and its lending curve update, its roadmap ahead includes transitioning to Bitocracy 3.0 before finally implementing the remaining Sovryn Alpha functionality on the new and updated app interface.

Valour ETPs

Concluding the month of July, Valour disclosed assets under management (AUM) totalling $149.3m. Meanwhile, the company reported that aggregated net sales continued to increase, rising to a total of $357.7m. Alongside the launch of Valour’s VDAB10 basket on NGM and its collaboration with Bitcoin Suisse AG, the company has a growing pipeline of products across both its certificates and physically backed issuance programs that will contribute towards its continued growth in the ever growing digital economy.

Valour offers fully hedged digital asset ETPs with low to zero management fees, with product listings across European exchanges, banks and brokers. Valour’s current product suites includes 12 unique ETPs including, Cardano (ADA), Polkadot (DOT), Solana (SOL), Uniswap (UNI), Avalanche (AVAX), Cosmos (ATOM), Enjin (ENJ), Binance (BNB), Bitcoin Carbon Neutral, and Valour Digital Basket 10 (VDAB10). Valour’s flagship Bitcoin Zero (BTC) and Ethereum Zero (ETH) products are the first fully hedged, passive investment products with 0% management fees.

For more information on products and offerings, visit: https://valour.com/.

Disclaimer:

This Newsletter is for informational purposes only and does not constitute, either explicitly or implicitly, any provision of services or products by Valour Inc or its subsidiaries, nor does it constitute investment advice. Valour Inc, and its affiliates, is not soliciting any action based on the content provided. Investments involve risk and investors should determine whether any particular product or service is suitable for their particular situation and/or seek professional advice. Past performance is not an indicator of future results and your capital is at risk.