Blockwall - July 2024 - What happened in Web3?

Dear Founders, Investors, and Friends,

In July, the market continued its sideways movement.

Apart from the launch of the ETH ETFs, the discourse within the crypto industry primarily revolved around the newest developments in Washington D.C.

Ethereum ETFs

On July 23rd, trading commenced for the nine ETH spot ETFs.

With a total trading volume of $1.12 billion and inflows of $107.8 million on its first day of trading, the launch was quite successful.

During their first week of trading, the ETFs experienced net outflows totaling $341 million, primarily due to significant withdrawals from Grayscale's ETHE ETF, which surpassed $1.5 billion in this short period of time.

Source: Farside Investors

As outflows start to diminish, as was the case with the Bitcoin ETFs, inflows into the new products might soon surpass ETHE’s outflows.

ETH's price reacted somewhat cautiously to the launch, ending the month with a modest decline of around 5%.

Crypto & US politics

However, a series of significant political developments in July in the USA overshadowed the long-awaited launch of the ETH ETFs.

First, the Republican Party has officially included issues regarding crypto to their party platform. More specifically, the party says that it opposes the establishment of a central bank digital currency (CBDC) and is committed to defending the right to mine Bitcoin. Furthermore, they advocate for every American to have the right to self-custody their digital assets and perform transactions without government oversight.

A few days later, a failed assassination attempt on US presidential candidate Trump occurred. According to some experts, this event has enhanced Trump's re-election chances, raising hopes for a crypto-friendly US administration and leading to a positive market response.

These hopes were further reinforced when Trump named US Senator J.D. Vance as his vice-presidential candidate. Vance is a known advocate for the crypto industry. He supported the repeal of SAB 121, publicly revealed his Bitcoin holdings in 2022, and is reportedly working on crypto-friendly regulatory legislation, as reported by Politico.

Meanwhile, the Democrats are also slowly but surely revising their stance on the crypto industry.

After Joe Biden announced he would not seek re-election and endorsed Kamala Harris as the Democratic nominee, US investor Mark Cuban revealed that Harris' team had reached out to him with questions about crypto. According to Cuban, they appear to be significantly more open to the industry compared to the current administration.

Moreover, a group of Democratic politicians have penned a letter to the Democratic National Committee, urging the party to shift away from the current anti-crypto stance championed by US Senator Elizabeth Warren. Instead, they are advocating for the party to adopt a more pragmatic approach towards the crypto industry.

Increased influence by the crypto lobby

This change in tone may also be partly attributed to the increasing influence of the American crypto lobby. The most prominent and well-funded crypto-related interest group is Fairshake, a Super Political Action Committee (PAC) founded last year.

Despite limited information about its origins and management, Fairshake has managed to raise nearly $202 million for the current election cycle to date, making it the largest Super PAC in the USA. Major contributors include Ripple Labs, the company behind the Ripple network, the crypto exchange Coinbase, and venture capital firm a16z, each donating close to $50 million.

Unlike traditional lobbying groups, PACs are legally barred from directly donating their funds to political candidates or parties. Instead, they influence elections indirectly through public communications, such as extensive advertising campaigns that usually support or oppose specific candidates.

A report by CNBC indicates that Fairshake has been involved in 35 US congressional primaries to date, successfully backing the winning candidate in 33 of those races.

Although those outcomes cannot be solely attributed to the lobby’s campaigns, it's fair to say that the crypto industry's influence on American politics has never been greater.

A political turning point?

This was particularly evident at Bitcoin 2024 in Nashville, the world's largest Bitcoin conference.

Prominent figures from the crypto industry, including Michael Saylor, were joined by representatives from major financial institutions like BlackRock and several US politicians at the event.

Some of the conference-highlights include:

• The CEO of Cantor Fitzgerald, a global financial services firm, announced the launch of a Bitcoin financing business, through which Bitcoin holders will be able to use their coins as collateral to secure loans.
• Republican US Senator Cynthia Lummis unveiled her bill to create a national Bitcoin reserve for the US. The 'Bitcoin Strategic Reserve Bill' outlines a plan for the US government to purchase one million Bitcoin over five years, retain these holdings for a minimum of 20 years, and eventually utilize them to lower the national debt.
• Donald Trump's speech garnered the most attention, as expected. If he should win the presidential election, he promised, among other things, to make the USA the ‘world's crypto capital’, to prevent the introduction of a central bank digital currency (CBDC), and to provide a comprehensive regulatory framework for stablecoins.

As is always the case with promises made by politicians during an election cycle, it's impossible to predict whether they actually will be fulfilled - besides the fact that the practical implementation of some of these suggestions is questionable.

Nonetheless, the Bitcoin 2024 conference has once again emphasized that, in addition to major financial institutions, crypto has now also made significant inroads into the political sphere.

Real-World Adoption

Amidst all the political talk, actual crypto adoption was also taking place this month.

The California Department of Motor Vehicles (DMV), in partnership with the software company Oxhead Alpha, has tokenized around 42 million car titles.

Building on a similar pilot project conducted last January on a fork of the Tezos blockchain, the recent tokenization was executed on a private subnet of the Avalanche Layer-1 blockchain, which is controlled by the DMV.

The primary goal of this initiative is to digitize the transfer and management of vehicle ownership rights, enabling these processes to be completed online rather than in person. By building upon blockchain rails, the participants also expect to reduce the number of fraud cases. In the coming weeks, citizens will be able to request and manage their digital vehicle titles using the DMV’s proprietary web3-wallet.

If successful, this initiative could be adopted by other US states and agencies, which would streamline the information exchange between different legacy systems.

Additionally, according to AvaLabs' Chief Business Officer, the DMV is contemplating expanding the project to incorporate blockchain-based payments and digital credentials.

Hopefully, we will see more of such implementations, especially also in Europe.

Key events in July

1. BlackRock's BUIDL tops $500 million market capitalization. Around four months after its launch, this makes the US asset manager's tokenized money market fund the largest of its kind. (Source: rwa.xyz)
2. Hamilton Lane launches tokenized fund on Solana. Professional investors can now invest a minimum of $10,000 in the investment firm's Senior Credit Opportunities Fund (SCOPE) and use the corresponding tokenized shares as collateral in DeFi protocols. SCOPE is the first institutional fund directly launched on Solana. (Source: Hamilton Lane)
3. Circle is said to be valued at $5 billion. According to a report from CoinDesk, shares in stablecoin issuer Circle are currently being traded at a valuation of between $5 billion and $5.25 billion on the secondary market by select employees and early-stage investors. (Source: CoinDesk)
4. Ferrari now accepts crypto payments in Europe. The sports car manufacturer already introduced crypto payments in the USA in October last year. (Source: Reuters)
5. American Pension Funds announce BTC ETF investments. Apart from the Michigan state pension fund, which announced a $6.6 million investment in BTC ETFs, the Mayor of Jersey City announced on X that the city's pension fund will invest approximately 2% of its assets in Bitcoin ETFs in the coming months. (Sources: Reuters & X)

What we’ve been reading

1. Toyota Blockchain Labs: How to Introduce Mobility into the Public Blockchain
2. In this paper the blockchain unit of the Japanese automobile manufacturer outlines their vision for 'Mobility 3.0' and discusses how smart accounts on the Ethereum network could potentially represent real-world vehicles and utilize NFTs for use cases such as car sharing.
3. Chainalysis: Money Laundering and Cryptocurrency Report.
4. In their newest report, blockchain analytics firm Chainalysis explores the various onchain money laundering techniques employed by criminal actors and outlines effective methods for detecting and combating these illicit activities.
5. Glassnode & Coinbase: Q3 2024 Guide to Crypto Markets.
6. Glassnode and Coinbase Institutional provide a comprehensive overview of the current state of the crypto markets. They delve into key metrics and trends impacting institutional investors, including the growing influence of ETFs, the evolving landscape of onchain activity, and the significant role of stablecoins. The report emphasizes the robust health of the crypto ecosystem, highlighting increased trading volumes, expanding user bases, and advancing regulatory clarity.

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