“3 observations and a chart” on the latest in the digital assets sector
Digital assets benefit from “Trump Trade” – BTC rallied more than 15% after July 13 assassination attempt
Donald Trump has positioned himself as the “pro-crypto” presidential candidate, seeking to seize upon a potential “wedge issue” among voters; recall that more than 40% of American adults own digital assets. Trump recently indicated in an interview with Bloomberg that he wanted the US to lead on crypto innovation lest well-positioned countries like China fill the void. He followed that up with a pro-crypto keynote address to the Bitcoin 2024 Conference in which he promised to maintain a strategic Bitcoin reserve and never sell the US government’s Bitcoin. He also pledged to pick crypto-friendly regulators and make the US the “crypto capital of the planet and bitcoin superpower of the world.” Digital assets rallied significantly after the July 13 failed assassination attempt on Trump, as Trump’s likelihood of winning the election rose. We think that presidential leadership to encourage American dominance in digital assets, blockchain and other emerging technologies is a major positive and likely under-priced catalyst for the sector.
Ether ETFs begin trading in US – another major milestone for digital asset sector
Ether ETFs were formally approved by the SEC in mid-July and began trading on July 23, 2024, just 6 months after the launch of the BTC ETF. While we do not expect the ETH ETF to mimic the BTC ETF launch, which was the most successful ETF launch in history, we expect significant inflows into the product. Ethereum hosts some of the most promising applications of blockchain technology including tokenization of real world assets, stablecoins for digital access to the US dollar, decentralized social networks and prediction markets. Investors will now have an easy, traditional and regulated vehicle to gain exposure to the promise of such technological advances. Ethereum also generates cash flow ($2.1 billion in 2023) that is primarily used to “buy back” ETH and reduce the supply in the market, akin to a stock buyback program, a factor that might be appealing to traditional investors. We think the approval of ETH ETFs in the United States continues to legitimize the crypto sector as an investable asset class providing exposure to high growth technology platforms.
Polymarket prediction market hit records volumes in July – breakout real world use case for blockchain
Polymarket is a decentralized prediction markets platform built on the Polygon blockchain. It is designed to allow users to trade and bet in real-time on outcomes of some of the most relevant real-world events such as the 2024 US Presidential election and sporting events. The platform is built on a public blockchain, ensuring that all transactions are transparent, unable to be censored and carried out quickly and accurately by smart contracts. Polymarket hit all-time highs in monthly trading volume of $213 million in July. More than $423 million has already been wagered on the winner of the election. In addition to being a vehicle of financial speculation, Polymarket is a more reliable source of “truth” over
traditional polling, with the possibility of financial loss motivating participants to be as accurate as possible and provide valuable foresight into market trends. We call attention to a breakout use case for blockchain-based applications.
Chart of the Month – Cryptocurrency Ownership Rates Have Surged Since 2021
Arena Digital Capital Partners is a liquid evergreen fund open to monthly subscriptions. We are always happy to discuss further with you or investors you think may have an interest in the sector. Please reach out to Bill Cline at williamc@arenadigital.capital.
Sincerely,
The Arena Digital Capital Management Team
Michael Schwartz, Michael Prober & William Cline
Arena Digital Capital Management was founded in January 2022 by three experienced traditional finance hedge fund professionals who have been deploying personal capital in the digital asset ecosystem since 2018. The team has managed billions of dollars of capital for high net worth individuals, family offices, and institutions ranging from pension plans and endowments to sovereign wealth funds. We have worked closely with institutional consultants, RIAs, and other advisors in serving their clients.
In May 2022 we launched Arena Digital Capital Partners, with the goal of providing a multi-strategy investment vehicle to access the digital asset ecosystem. Our mandate is to offer broad exposure across the growing digital asset and blockchain sector with an appropriate level of diversification, professional oversight, and manager selection. Our collection of skill sets and our history in the business allows us to understand, assess, and engage with the practitioners of this nascent asset class with a level of diligence required to be responsible stewards of capital. We are happy to periodically share our observations with you.
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