New in Digital Assets: September 2023

The current narrative dominating crypto markets revolves around the persistently low trading volumes on both centralised and on-chain exchange platforms. In fact, both bitcoin (BTC) and ether (ETH) have recently experienced trading volumes not seen since before the most recent crypto bull market that began in the summer of 2020 and extended through 2021. Despite positive developments in the legal and institutional adoption fronts, low volumes and historically low levels of volatility underline the prevailing sense of apathy across crypto markets.

Throughout September, asset prices gradually rebounded from their August losses and were ultimately capped off by a strong final week of trading. The strong month-end performance occurred despite the SEC’s decision to delay issuing a verdict on the status of several spot BTC ETF proposals. Rather, much of the late-month market momentum seemed to be attributable to the approval of Ethereum (ETH) futures ETFs in the United States. By the first week of October, several asset managers had successfully launched futures-based ETH ETF products.

market performance table

Graph: Ethereum is operating profitability one year after the merge

It has now been a year since Ethereum’s changed from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) blockchain. Among the most significant benefits of Ethereum’s transition to PoS has been the significant reduction in the network’s energy consumption. Since the Merge, Ethereum has slashed its energy usage by a staggering 99%, positioning Ethereum as a responsible and eco-friendly blockchain.3

Ethereum’s new PoS consensus mechanism has also eliminated the need to pay external service providers (miners) hefty rewards for their security services. Instead, Ethereum now relies on network participants to collateralise ETH holdings to provide these same services. Given the far lower costs of running a validator on Ethereum as compared to a PoW mining rig, the Merge has allowed Ethereum to significantly reduce its expenses. Coupled with steady network activity that is generating a reliable baseline level of transaction fees, Ethereum has demonstrated its ability to operate profitably even amid challenging market environments.

News & Headlines

ETH Futures ETFs Go Live in the United States

Several asset managers received accelerated approval to launch ETH futures ETFs in the US including Volatility Shares, Bitwise, VanEck, Roundhill, and ProShares.4 In addition, Valkyrie also received SEC approval to convert its existing BTC futures ETF into a two-for-one investment vehicle that provides exposure to ETH futures contracts as well.

These newly launched ETFs are now live and available for trading. This development marks another significant step towards the potential approval of spot BTC ETF products in the U.S. and is being viewed as a critical milestone in the broader legitimisation of leading crypto assets as an investable asset class.

Visa Expands Stablecoin Initiative to the Solana Blockchain

In support of its goal to modernise cross-border transactions, Visa announced that it is expanding its stablecoin settlement capabilities to the Solana blockchain.5 Through live pilots with issuers and acquirers, Visa has already moved millions of USDC among its partners as a means of settling fiat-denominated payments authorised over VisaNet. These transactions had previously been facilitated solely on the Ethereum network.

As Visa has explored expanding similar capabilities to a growing number of client relationships, however, demand to utilise a multitude of blockchain networks including high-performance chains such as Solana has increased. Visa’s announcement makes the payments giant among the first globally significant companies to facilitate instant settlement transactions between clients using Solana.

For, Sets Precedent for Decentralised Exchange Platforms

In April 2022, a group of investors initiated a class-action lawsuit against Uniswap, the largest decentralised exchange on the Ethereum blockchain. The plaintiffs alleged that Uniswap was responsible for their financial losses which were the result of declining prices of tokens which they had purchased on Uniswap’s front-end interface. The plaintiffs argued that Uniswap bore responsibility for these losses because it facilitated the trading of these tokens.

However, in a recent development, the judge overseeing the case dismissed the lawsuit.6 The judge’s rationale was that Uniswap operates through a series of self-executing smart contracts, meaning it does not have any control over the tokens listed or traded on its platform.

The decision is being viewed as a victory for Uniswap as well as for other decentralised exchange platforms. Importantly, the decision establishes a precedent that these and like platforms are not legally responsible for the actions of their users, underscoring the importance of user discretion when trading tokens.