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  • Writer's pictureMichael Schwartz

In the Arena | October 1, 2023

Updated: Dec 3, 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.

 

SEC continues to lose anti-crypto crusade in US courts

In a decisive rebuke to the SEC, three judges on the DC Circuit Court of Appeals unanimously ruled that the SEC’s rejection of Grayscale’s spot Bitcoin ETF application was “arbitrary and capricious” and failed to uphold consistent legal standards. The court noted that "Grayscale presented uncontested evidence that there is a 99.9% correlation between Bitcoin’s spot market and CME futures contract prices", yet the SEC denied the usage of similar market manipulation protections as those used in the previously SEC-approved futures-based Bitcoin ETF traded on the CME. We expect the ruling will accelerate the

approval of a Bitcoin ETF in the US, which could come later this year or in early 2024.


JP Morgan and Citibank develop blockchain-based tokens for payments and settlement

Large, incumbent US financial institutions continue to develop blockchain-based financial services that have the potential to offer faster and cheaper banking solutions. JP Morgan is currently exploring a blockchain-based digital deposit token for speeding up cross-border payments and settlement. Citi just announced “Citi Token Services” that tokenizes customer deposits and enables instantaneous global transfers via blockchain. Potential benefits include instantaneous settlement and cheaper transfer rates compared with legacy banking rails as well as 24/7 banking access. We continue to believe that digital asset technologies have the potential to upgrade the regulated financial system by applying new technologies to existing legal frameworks.


Venture capital continues to invest in crypto with focus on infrastructure and tokenization of real world assets

Despite negative headlines and sentiment in the US, venture capital funding continues to flow into the blockchain sector. Just last week, Blockchain Capital raised $580 million across two new funds. Blockchain technology is in its “dial-up to broadband” stage. A significant amount of venture funding is being devoted to the infrastructure and scaling solutions that enhance transaction speeds and volumes at lower cost, thereby facilitating the use of blockchain at commercial scale. Another primary focus is the tokenization of real world assets. Assets such as US Treasury bonds, commercial real estate, private at lower cost, thereby facilitating the use of blockchain at commercial scale. Another primary focus is the

tokenization of real world assets. Assets such as US Treasury bonds, commercial real estate, private credit and private equity can be digitized and factionalized onto a digital ledger that allows for 24/7 trading without the need for a trusted third party intermediary. We agree with BlackRock CEO Larry Fink that tokenization is the “next generation in markets” and Franklin Templeton CEO Jenny Johnson that blockchain technology is “the greatest disruption to financial services”.


Chart (Image) of the Month


Days to Minutes . . .

Video Clip of the Month


6 minute explanation…


This 6 minute video is one of the best and most concise explanations of the benefits of blockchain technology.



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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