ETH ETFs, summer slumps, and Waka Flocka Flame ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ Q2 REPORT Crypto Danish Ajmeri — Head of Crypto July 17, 2024 Q2 IN NUMBERS April 1 - June 30 BTC: -10% ETH: -2% SOL: -24% Total crypto market cap: $2.29T (-12%) Three big changes in crypto Hi there, After a strong start to the year — when BTC hit all-time highs and a bunch of memecoins rallied — things got a bit choppy this spring and early summer. Overall sentiment turned bearish, despite some positive news that I’ll get into below. Experts chalked up a lot of that negativity to fatigue: as it turns out, the market can only ride the coattails of the United States’ successful BTC ETF launch for so long. The general macro uncertainty didn’t help either. Plus, we started summer, which is great for my own emotional well-being but has traditionally been a slow time for the industry. Here’s what you need to know: Ethereum ETFs got surprise approval in the U.S. After the enormous success of Bitcoin ETFs earlier this year, the crypto world eagerly anticipated Ethereum (ETH) to follow suit in late May, when the SEC was expected to change the rules prohibiting the first ETH ETF in the U.S. But then, crickets. In response, prediction markets put the chances of approval at less than 10%. But right before the deadline, reports emerged that the SEC was in touch with potential ETF issuers. The markets celebrated, and within a couple of hours, ETH jumped about 20%, to almost $3,800. ETFs were officially approved on May 28 and are expected to start trading later this month. Crypto got more prominent in U.S. politics Crypto has lost a lot of political support in the U.S. in recent years, particularly among members of the Democratic party. But with federal elections coming up this fall, it’s right back in the conversation. Republican presidential candidate Donald Trump has taken a strong pro-crypto stance, vowing to end what he called President Joe Biden’s “war on crypto.” Also, more than 70 Democrats joined Republicans to pass the new FIT21 crypto bill in the House of Representatives. The bill would help define cryptocurrencies as either commodities or securities — an important distinction that determines which government group regulates which digital assets. It also introduces consumer protections, including required registration for exchanges operating in the U.S., and the separation of company funds from customer funds, so that we can hopefully avoid another FTX-style implosion. There are two remaining hurdles, however: FIT21 still needs to be approved in the Senate and signed by President Biden, who has stated his opposition. Celebrities took over from the dogs If Q1 was all about dog-themed memecoins, Q2 was about celebrity coins. Everyone from Iggy Azalea to Caitlyn Jenner to Waka Flocka Flame launched their own memecoins with limited functionality and varying degrees of success. $MOTHER, Azalea’s coin, reached a $150M market cap a few days after launch, although its value has since dropped to $37M. This trend set off a debate reminiscent of the one around memestocks like GameStop: some think it’s empowering for regular investors to drive (and benefit from) price surges, while others see the coins as just another pump-and-dump that leaves retail investors holding the bag. What’s next? As I mentioned above, summer tends to be pretty boring, with a lot of investors getting up from their computers and taking vacations (“touching grass”). It’s so boring that people have come up with a pithy saying about it: “sell in May and go away.” Even if the markets are snoozing this summer, however, there is still plenty to look forward to. For one thing, if the reaction to those new U.S. ETH ETFs is anything like it was to BTC ETFs, we could be in for some price movement. We’ll also see what happens after large ecosystem airdrops from projects like ZkSync (a new layer-2 blockchain that promises to help scale Ethereum transactions without sacrificing security) and LayerZero (a key infrastructure project trying to make it easier — and safer — to move assets from one blockchain to another). All the best, Danish Ajmeri Head of Crypto CRYPTO 201 Low float, high FDV The phrase “low float, high FDV" has been popping up more and more around the cryptoverse lately. Low float means that an asset has a small circulating supply, which often happens when creators hold on to the majority of the available new coins after a launch. High FDV refers to a coin’s fully diluted valuation. Unlike market cap, which is an asset’s current value multiplied by the total number of coins in the market, FDV is calculated by multiplying the current value by the total number of coins in existence. This phenomenon tends to create volatility, as the limited number of available tokens allows relatively small trades to cause sharp price movements. There’s also a risk that the eventual release of the locked supply can create downward price pressure. When insiders dump their holdings, there aren’t enough buyers to keep up, and the price can fall off a cliff. A few examples of assets currently experiencing low flood, high FDV include World Coin ($700M market cap, $28B FDV) and SUI ($2B market cap, $8.3B FDV). As investors, you don’t necessarily have to avoid this type of coin. But if you do invest, it’s important to be aware of these dynamics — and able to handle the additional risk and volatility. 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