At a crypto convention in Nashville, Tennessee, in late July, Donald Trump urged attendees to ‘never sell your bitcoin.’ The speech he held is part of his strategy to attract crypto-focused voters as the November election approaches, and it includes a proposal for a state bitcoin reserve. Trump promised that, if elected, his administration would retain all bitcoin the US government currently holds or acquires in the future, forming a ‘strategic national bitcoin stockpile.’
Trump is not alone in this vision. US Senator Cynthia Lummis has proposed legislation for the government to buy one million bitcoins, around 5% of the total supply. In comparison, independent candidate Robert F. Kennedy Jr. has suggested a stockpile of four million bitcoins. The US government already holds approximately $11.1 billion worth of cryptocurrency, mainly from criminal seizures such as the Silk Road shutdown in 2013.
Currently, the US government possesses about 1% of the global bitcoin supply, which is capped at 21 million coins. Comparatively, private investors like Microstrategy hold around 226,500 bitcoin tokens, while BlackRock’s iShares Bitcoin Trust and Grayscale Bitcoin Trust hold 344,070 and 240,140 tokens, respectively. A government bitcoin reserve could influence bitcoin’s price positively but might also limit the number of tokens available for trading.
Why does this matter?
Despite the uncertainty of a national bitcoin reserve’s implementation, experts are speculating its possible structure. One idea is for the Federal Reserve to manage the reserves for the Treasury Department, similar to gold reserves. Another possibility is a structure akin to the Strategic Petroleum Reserve, with control shared between the president and Congress.
While the concept of a state-controlled bitcoin reserve conflicts with the decentralised nature of cryptocurrency, its increasing prominence in political campaigns is welcomed by the industry. Market players anticipate that both political parties will continue to focus on digital assets beyond the upcoming election.
Bitcoin and ether tumbled to their lowest levels in months on Monday as concerns about a potential US recession triggered a selloff in riskier assets and a flight to safer investments. Both cryptocurrencies, which had previously gained from the approval of a spot bitcoin and ether exchange-traded fund by the US Securities and Exchange Commission, are now facing significant losses.
Bitcoin dropped 13% to $51,560, its largest one-day decline since November 2022, while ether fell 17% to $2,277, its lowest since mid-January. The drop is part of a broader downturn affecting global equities and other assets, with bitcoin losing over a third of its value since reaching an all-time high in March.
Market analyst Tony Sycamore noted that bitcoin is approaching critical support levels around $54,000 to $53,000, and failure to maintain this support could lead to further declines towards $48,000. The broader impact is also visible in the stock market, where shares of crypto-related companies like Coinbase, Riot Platforms, and Marathon Digital have plummeted in early trading, reflecting the broader sentiment in the crypto market.
Coinbase’s second-quarter revenue surpassed Wall Street predictions, fuelled by a revival in trading volumes and positive market sentiment due to regulatory relaxation. That resulted in a 3% rise in the company’s shares. The US Securities and Exchange Commission (SEC) approved an exchange-traded fund (ETF) to track bitcoin and ether prices, resolving a prolonged regulatory conflict and boosting market confidence. CEO Brian Armstrong expressed hope for constructive future regulatory measures.
Despite ongoing disagreements with the SEC over crypto token classifications, the approval of spot bitcoin ETFs by major financial players like BlackRock and Fidelity has bolstered the sector’s credibility. As a result, the total market capitalisation has increased to around $2.36 trillion. Revenue from Coinbase’s subscription and services segment jumped 79% to $599 million, with total revenue doubling to $1.45 billion, exceeding analyst forecasts. The company reported a profit of 14 cents per share, compared to a loss in the previous year.
Why does this matter?
Coinbase’s strong Q2 performance signals a significant recovery and growth in the cryptocurrency market, driven by positive regulatory developments. The SEC’s approval of bitcoin and ether ETFs marks a pivotal moment, potentially attracting more institutional investors and increasing mainstream acceptance of digital assets.
California’s Department of Motor Vehicles (DMV) has digitized 42 million car titles using blockchain technology to prevent fraud and streamline the title transfer process. In collaboration with tech company Oxhead Alpha on Ava Labs’ Avalanche blockchain, the DMV will enable California’s 39 million residents to claim their vehicle titles through a mobile app, the first initiative of its kind in the US.
John Wu, president of Ava Labs, explained that the blockchain will create a transparent and unalterable record of property ownership, reducing the need for in-person DMV visits and acting as a deterrent against lien fraud. California residents can expect to access their digital car titles early next year as the DMV develops the necessary app and infrastructure.
In addition to this project, Deloitte has partnered with Ava Labs to create a disaster recovery platform for the US government, streamlining disaster reimbursement applications to the Federal Emergency Management Agency. The shift towards digitization, as seen with Michigan’s pension fund investing $6.6 million in a Bitcoin ETF, and Trump promoting US crypto leadership, indicates a growing interest in the benefits of blockchain technology across various sectors.
The integration of blockchain extends to autonomous vehicles as well, which have been making payments through this technology since 2019. With these advancements, more government sectors are likely to explore blockchain’s potential, reflecting a broader trend towards digital transformation.
Russia plans to make its first international payments in cryptocurrencies by the end of this year to counter the challenges posed by Western sanctions, according to the central bank governor, Elvira Nabiullina. The move comes as local banks face increasing delays in processing payments with major trading partners due to cautiousness influenced by Western regulators.
A new law, expected to be approved by the lower house of parliament, will allow Russian companies to use cryptocurrencies for international transactions. The law is anticipated to come into effect in the autumn. Nabiullina stated that discussions with ministries, agencies, and businesses are already underway, and the central bank is prepared to be flexible in implementing the new regulations.
Currently, cryptocurrencies are not permitted for payments within Russia. The introduction of this law aims to address the significant delays in international payments, which have become a major challenge for the Russian economy. The central bank emphasised that the risk of secondary sanctions has complicated payments for a wide range of imports, resulting in longer supply chains and increased business costs.
Shares of New York-listed cryptocurrency companies surged on Monday following Donald Trump’s endorsement of bitcoin and his promise of more favourable regulations if elected.
Coinbase shares climbed 3.7%, while Bitfarms, Riot Platforms, and CleanSpark saw gains ranging from 3.4% to 4.5%. Analysts at Bernstein noted that the crypto market is optimistic about a potential Trump victory, especially compared to the current Biden administration’s stricter regulatory stance.
Crypto executives have frequently criticised the Biden administration’s oversight, although SEC Chair Gary Gensler defends it due to bitcoin’s volatility and speculative nature. Despite these regulatory hurdles, cryptocurrency has gained mainstream acceptance, with support from institutional investors and ETFs linked to bitcoin and ether prices.
Why does it matter?
A Trump victory could provide a further boost to the industry. He recently suggested creating a national bitcoin stockpile and expressed interest in mining all remaining bitcoin in the US. Bitcoin rose by up to 2.4%, hitting its highest level since mid-June.
The State of Michigan Retirement System’s recent $6.6 million investment in the ARK 21Shares Bitcoin ETF (ARKB.Z) marks a significant step in the institutional adoption of cryptocurrency assets. Managing approximately $143.9 million in total assets for state employees, Michigan’s decision reflects a growing acceptance of digital assets among institutional investors.
The move aligns with a broader trend of diversification within pension fund portfolios, highlighting a shift towards incorporating digital assets into traditional investment strategies. Similarly, the State of Wisconsin Investment Board recently disclosed significant cryptocurrency holdings, including investments in BlackRock’s iShares Bitcoin Trust and the Grayscale Bitcoin Trust.
The influx of institutional capital into Bitcoin ETFs could help stabilise the often volatile cryptocurrency market. Analysts, including Todd Sohn from Strategas, suggest that institutions’ longer investment horizons can mitigate extreme price fluctuations that Bitcoin has historically experienced. As more institutional investors, including public pension funds, allocate capital to Bitcoin ETFs, the overall market dynamics could evolve, fostering a more stable environment for cryptocurrencies. These investments signify a significant shift towards cryptocurrency among public pension funds, traditionally driven by retail investors.
Additionally, the mayor of Jersey City, New Jersey, has indicated plans to allocate a portion of the city’s pension fund to Bitcoin ETFs. Although specific timelines have yet to be announced, this further underscores the trend of public pension funds considering cryptocurrency as a viable investment option. These actions signal the growing legitimacy and acceptance of cryptocurrencies in mainstream finance. As institutional interest grows, stakeholders will closely monitor these developments, potentially paving the way for increased stability and broader acceptance of cryptocurrencies.
Speaking at the Bitcoin 2024 conference, Donald Trump emphasised the importance of the US leading in cryptocurrency, warning that failure to do so would allow China to dominate. He highlighted his plan to create a national ‘stockpile’ of bitcoin and establish a crypto advisory council if elected. Despite previously criticising cryptocurrency, Trump now promotes expanding US bitcoin mining.
Trump’s stance contrasts with that of Democrats, who he claims seek stricter regulation of the crypto sector. He criticised current regulatory actions and suggested that a strategic bitcoin reserve would legitimise digital currencies. The response from the crypto community has been mixed, with some seeing his proposals as a positive step.
Trump also reiterated his intent to commute Ross Ulbricht’s life sentence, creator of the Silk Road marketplace, sparking applause at the event. Meanwhile, some Democratic lawmakers are urging their party to adopt a more progressive approach to digital assets, recognising the growing influence of crypto enthusiasts in politics.
Why does this matter?
The change in Trump’s stance comes as global concerns about cryptocurrencies’ potential risks persist, including their impact on financial systems and susceptibility to crime. Despite these challenges, Trump’s advocacy for cryptocurrency reflects its emerging role in political discourse.
The launch of spot Ether exchange-traded funds (ETFs) in the US on 23 July 2024 marked a significant milestone. On their first day, Ether ETFs attracted about $106 million in net inflows, with BlackRock iShares Ethereum Trust leading at $266.5 million. However, these figures are modest compared to the nearly $7 billion inflows seen by Bitcoin ETFs in their first three weeks. Analysts predict Ether ETFs may capture only 20-25% of Bitcoin ETF inflows, with some estimates as low as 10%, reflecting market complexities and investor sentiment.
Investor reactions to the ether ETF launch are varied, with many experts expressing cautious optimism. Nathan Gauvin, CEO of Gray Digital, suggests that the launch might not have the transformative impact some anticipated, describing it as ‘less of an event than people are making it seem to be.’
A significant concern among investors is the US Securities and Exchange Commission’s decision to exclude staking from these ETFs. Staking allows Ethereum holders to earn rewards by locking up their ether, enhancing potential returns. The current ETF structure only permits holding unstaked ether, leading some investors to compare this to owning a bond without receiving interest payments. Chanchal Samadder from ETC Group echoed this sentiment, likening holding an unstaked ether ETF to owning a stock without the right to dividends.
Why does this matter?
The exclusion of staking options is a major point of contention within the industry. Many experts, including CoinShares’ Steven McClurg, believe that investors may continue to stake their ether outside the ETF framework to earn yields, potentially diminishing the attractiveness of the ETFs. This situation highlights the challenges of regulatory constraints and the need for a more comprehensive approach to integrating staking into these investment vehicles.
Coinbase has added three new members to its board of directors, including an executive from OpenAI, as part of its strategy to influence US crypto policy. The new board members are Chris Lehane from OpenAI, former US Solicitor General Paul Clement, and Christa Davies, CFO of Aon and a board member for Stripe and Workday. This expansion brings the board from seven to ten members.
The additions come as Coinbase and the cryptocurrency industry aim to strengthen their political influence in the upcoming presidential election. Clement will guide Coinbase’s efforts to counter the SEC and advocate for clear digital asset regulations. Lehane, a former Airbnb policy chief, will provide strategic counsel, while Davies will focus on enhancing Coinbase’s financial and operational excellence globally.
Stand With Crypto, a non-profit organisation funded by Coinbase, now boasts 1.3 million members, and three major pro-crypto super political action committees have raised over $230 million to support favorable candidates.
