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In the Arena | July 1, 2024

Writer's picture: Michael SchwartzMichael Schwartz

Updated: Oct 1, 2024



“3 observations and a chart” on the latest in the digital assets sector


Trump, Biden and Kennedy each declare themselves to be “pro-crypto”– US presidential candidates courting “crypto” voters

In early May, Donald Trump declared that “if you’re in favor of crypto, you better vote Trump.” Trump was attempting to capitalize on the unpopularity of Democrats’ anti-crypto stance among the 50 million Americans who own digital assets and the millions of single issue voters in favor of reasonable crypto regulation in the United States. By the middle of the month, the Trump campaign began accepting donations of Bitcoin, Ether and other digital assets. In response, the Biden administration reversed course and the SEC approved the applications of 8 issuers to list and trade spot Ether (ETH) exchange traded products. The Biden administration also indicated an eagerness to work with Congress on comprehensive crypto legislation despite a Biden veto of the recent bipartisan repeal of SEC Staff Accounting Bulletin 121 (SAB 121), a controversial SEC accounting rule that imposed burdensome capital requirements on crypto custodians. Third-party candidate Robert Kennedy, Jr. has always been in favor of digital assets and crypto innovation and polls showed that he was taking critical votes in swing states.  We think that the attention of presidential candidates on crypto is a major positive for the industry and marks significant progress towards a reasonable regulatory framework in the US.


Medical device maker Semler Scientific adds Bitcoin to its balance sheet – stock up 25%

In early June, Semler Scientific, a small med-tech firm with a $200MM market cap, made Bitcoin its primary treasury reserve asset. The company bought more than $57 million of BTC  and announced that it was raising an additional $150 million for subsequent purchases. Semler’s stock rose 25% on the announcement. The move mimics similar strategies by companies like MicroStrategy and Tesla who added Bitcoin to their balance sheets. New accounting standards that allow digital assets to be reported at fair market value facilitate corporate adoption of BTC as a treasury asset. We note the growing interest of corporate entities in diversifying into digital assets amid changing financial landscapes and regulatory environments.


ETH not a security – SEC drops investigation into Ethereum

In mid-June, Consensys announced that the Enforcement Division of the SEC notified the company that it was closing its investigation into Ethereum and not bringing charges alleging that sales of ETH are securities transactions. Essentially, the SEC confirmed that it will not classify ETH as a security. It will instead be deemed a commodity and under the purview of the CFTC. We note incremental positive regulatory clarity that facilitates technological innovation.


Chart of the Month –  Bitcoin is growing faster than the Internet




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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