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  • Writer's pictureMichael Schwartz

In the Arena | November 1, 2023



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.

 

Bitcoin ETF Coming Soon – Grayscale, BlackRock, Fidelity and Ark continue to prepare for SEC approval and BTC rallies more than 20% in October

A number of financial institutions continued to prepare for the expected approval of a Bitcoin ETF by the SEC. Grayscale filed a registration statement on Form S-3 with the SEC to allow for the Grayscale Bitcoin Trust (GBTC) to immediately operate as an ETF upon receipt of regulatory approval. BlackRock listed its Bitcoin ETF on the Depository Trust & Clearing Corp. database. Blackrock, Fidelity and Ark also updated filings with the SEC, indicating a readiness to immediately commence ETF trading on approval. And the SEC did not appeal its adverse ruling in the Grayscale ETF case. We continue to expect approval of a Bitcoin ETF in the US in short order and note a similar expectation in the market as reflected in the

significant run in the price of Bitcoin in October.


Technological development of blockchain in B2B infrastructure – consumers may never need to know

In the search for blockchain use cases, investors tend to focus on business to consumer applications (B2C). Examples include Bitcoin, stablecoins, and crypto wallets/remittances. However, there is a growing case to be made that the next phase of blockchain adoption will take place business to business (B2B). Financial institutions like JP Morgan — which has a 300 person blockchain unit called Onyx and currently settles $2 billion worth of transactions in its digital token JPM Coin daily – are using blockchain to settles $2 billion worth of transactions in its digital token JPM Coin daily – are using blockchain to improve upon the speed, cost and security of processing and settling banking transactions. JP Morgan

recently used tokenized money market fund shares as collateral in clearing an OTC derivatives trade with Barclays, reducing the friction and improving the efficiency in meeting margin calls. We think the consumer will ultimately benefit from many financial infrastructure improvements without ever knowing that they are driven on blockchain networks.


Web wallet functionality and ease of use improving – where consumers need to know

MoneyGram, one of the largest remittance companies in the world, and MetaMask, the top

non-custodial wallet in the digital asset industry (boasting 22 million users), recently made significant improvements in the functionality of their digital asset wallets. MoneyGram announced a digital asset wallet that enables USDC stablecoin remittances through a global ATM network. Metamask added direct fiat cash-outs to both PayPal and bank accounts. Both are improvements that make digital assets easier to use for money transfers and remittances. We believe that customer engagement with the digital asset ecosystem needs to become easier and highlight continued progress to that effect.


Chart (Image) of the Month


Consider in light of a 2024 BTC ETF (BTC Demand Shock) and 2024 BTC Halvening (BTC Supply Shock)…

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

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