“3 observations and a chart” on the latest in the digital assets sector
Digital assets rally on the back of US Federal Reserve 50 bps rate cut – prices and volumes spike as Fed begins to buttress global liquidity
The digital asset markets showed strong performance following the Federal Reserve's 50 bps rate cut in mid-September. Bitcoin surged from a weekly low of $57,570 on Tuesday before confirmation of Fed policy to $64,080 (+11%). Similarly, Ether rose from a weekly low of $2,264 to a high of $2,547 (12.5%) by the end of the week. Average daily volumes spiked to $26.7 billion and $16.5 billion for BTC and ETH, respectively. Overall digital asset market capitalization increased to $2.21tn, with strong performance across the market as only eight of the top 100 projects by market capitalization declined in value over the course of the week of the rate cut. We think that Fed rate cuts will continue to be a positive macro catalyst for the digital asset sector as Bitcoin and digital assets prices have historically been positively correlated with increased global liquidity like that created by Fed rate cuts.
Both Trump and Harris support the development of digital asset technology – “crypto is purple” with bipartisan support from both presidential candidates
While Donald Trump has been the more supportive and vocal candidate about the US taking a leadership role with respect to digital assets globally, Kamala Harris noted for the first time that she supported digital asset innovation. She stated at a NYC fundraiser that “we will encourage innovative technologies like AI and digital assets, while protecting consumers and investors.” Meanwhile, the Trump family launched a new decentralized finance (DeFi) venture and the former president used Bitcoin to buy dinner for patrons at the Pubkey Bar in Greenwich Village, New York. We think that bipartisan focus and support for innovation around digital asset technology will lead to productive US legislation and a regulatory regime that will buoy digital asset markets.
Blockchain-based prediction markets continue to develop at rapid pace – serve as credible source of truth in world of information overload
Prediction markets are financial markets that allow participants to buy and sell shares based on the outcomes of real-world events. Events include political elections, sporting events and economic data releases. In a world inundated with social media and news platforms, there is a growing mistrust in traditional gatekeepers of information. Prediction markets harness the collective intelligence about real world events and use financial incentives to provide dependable and dynamic real-time expectations about the probabilities of world events. Prediction markets built on blockchain technology record every transaction, bet and outcome on a public, immutable ledger, ensuring complete transparency and trust in the data outputs. Such markets have been one of the breakout use cases for blockchain in 2024. Polymarket, a prediction market built on the Ethereum and Polygon blockchains, has 63,000 unique monthly traders, with $473 million of monthly trading volumes (a 7,100% increase year to date) and has recently been added as a data source on the Bloomberg terminal used by finance professionals. The market is accessible globally to anyone with an internet connection and digital asset wallet. We highlight a strong example of a commercially viable and socially useful application of blockchain technology that facilitates the search for objective truths and data in a world awash in misinformation.
Chart of the Month – Bitcoin and Global Liquidity positive correlation
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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